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What is the recession, where has the German economy fallen?

2023-05-26 17:27:25Biznes SHKRUAR NGA KLAUS ULRICH
What is the recession, where has the German economy fallen?
What is the recession, where has the German economy fallen?

The German economy has fallen into recession. How dramatic is the situation?

First the corona pandemic with all its consequences – for example the dramatic problems in supply chains, then the war in Ukraine: the German economy faced a double blow in recent years. Prices and interest rates are rising, supply bottlenecks and energy shortages are weighing on the economy – and according to economists' theories, that economy is going up and down in waves. Economists usually talk about four stages:

-Economic growth or prosperity

-Economic boom

-Recession

-Economic depression

Recession means decline, e.g. when production capacities are no longer fully utilized because the level of export in foreign trade and the demand for goods and services in the domestic market fall.

Such a thing can happen very quickly, not only in Germany, because consumers have to pay a lot of money due to high energy prices, which leads to a decrease in purchasing power for other products.

Gross domestic product

The much-cited gross domestic product, or GDP for short, is considered a standard measure for economic cycles. This term represents the value of all services and goods produced in a given period of time.

If GDP shrinks for two consecutive quarters, it is a "technical recession" - which threatened Germany at the end of 2021 after GDP contracted by 0.3 percent in the last quarter of the year as a result of the corona pandemic. In the first three months of 2022, economic output increased by 0.2 percent. But in the spring of 2023, the situation is different. Because the German economy shrank both in the last quarter of 2022 and in the first quarter of the current year.

Economic depression as a horror scenario

If a recession lasts for a relatively long period of time, it can turn into a real economic crisis. In such cases, there is talk of economic depression: unemployment and the number of bankruptcies increase, goods remain stock in warehouses. The terrible scenario is completed by financial crises, stock market crashes and bank bankruptcies.

Curative tool: state aid programs

It is therefore important for the state to prevent falling into depression and thus falling into the lowest phase of the economic cycle. Therefore, the government will try to counter the recession that is developing in the country or to make it last as little as possible. Proven tools to do this are relief packages for companies and citizens, such as government aid and tax cuts./ DW


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