Germany was forced to cut its economic forecast after figures revealed that industrial production in the eurozone slumped in August.
In August, production was 1.9% lower than a year ago.
Portugal, however, bucked the trend and had one of the largest annual increases in industrial output of all 18 member countries. Its 3.9% increase was the third biggest, after Ireland and Luxembourg.
But the slowed output in Germany made it reduce its expectations of growth to 1.2%, down from 2%, as exports slowed down. This is slower than either the UK or the US.
The economy minister, Sigmar Gabriel, blamed geopolitical tensions and global economic problems overseas. He said: “The German economy is steering through rough foreign waters. Geopolitical crises have also increased uncertainty in Germany and moderate growth is weighing on the German economy.”
Germany’s economy had been growing consistently in recent years. But with the downturn, opinions in favour of relaxing austerity measures have become more vocal.
Last week France called for a €300bn spending boost across the euro region and Italy lobbied for relaxing restrictions in order to encourage investment and growth.
But Germany’s finance minister was not convinced. “There is no reason to abandon or change our economic or fiscal policy. Increasing debt in Germany will not generate additional growth in Italy, Spain, France and Greece,” he said.
Observers fear that the eurozone will be plunged into a triple-dip recession.
Together, Germany, France and Italy generate 66% of eurozone GDP. All of their economies contracted in the second quarter and all could contract again in the third.
