Wind of recession in Germany, what are the risks for Italy and the EU

The German numbers are, according to recent analyses, alarm bells for the entire continent

The wind of recession is blowing from Germany, but it could drag the whole of Europe – and Italy – into an economic crisis with still vague contours and with an alarming potential that could lead the old continent to contract.

The warning comes from macro data released on Monday May 8: German industrial production has collapsed the most in a year, raising the risk that Europe’s largest economy has slipped for real into a winter recession.

Specifically, German industrial production fell by 3.4% in March. The slump was particularly pronounced in the automotive sector, according to the statistics office.

While the data comes with a big lag and the most recent releases suggest that the economy as a whole is booming in the European powerhouse, the unexpectedly poor manufacturing performance could still see the first-quarter reading for gross domestic product fall. That means Germany could enter a recession between October and March after vacillating between growth and contraction since Russia attacked Ukraine and inflation took off.

There is no alarmism, but yes there is concern. The German numbers are, according to recent analyses, alarm bells for the entire continent. They reflect all the weaknesses of the global and, specifically, European financial and economic system.

Looking at Germany, according to ING economist Carsten Brzeski, it can be noted that “more structurally, production expectations have weakened again, the order book has thinned and inventories remain high… And the prospects are anything but how rosy”.

Despite the different peculiarities of the system of the EU countries, one cannot fail to notice that in Germany’s fragility there are signs of a delicate moment for the whole continent. The ECB will remain aggressive and this will hit the various nations, including Italy which is shaking with its high debt.