Germany's economic recovery faces new headwinds from the escalating tensions in the Middle East, said Clemens Fuest, president of the renowned ifo Institute for Economic Research, one of Germany's largest economic think-tanks.
Fuest warned that the U.S.-Israeli war on Iran is undermining Germany's fragile economic rebound, compounding existing challenges from U.S. tariff policies.
"Germany is very heavily reliant on foreign trade and has been affected by U.S. tariff policies. Germany is at present in a difficult economic situation. We are currently at the same level as in 2019, which means six years of stagnation, now in its seventh year. And now the U.S.-Israeli war on Iran has been added to the mix. It was actually expected that growth would return this year, driven by government spending and borrowing, but the war with Iran has now intervened, meaning that growth this year will likely be weak, at around 0.6 percent," he said.
Fuest said that while Germany is not currently facing immediate shortages in energy supplies such as natural gas, disruptions to shipping through the Strait of Hormuz pose significant risks to global energy stability, and such disruptions would inevitably impact global industrial and supply chains, creating additional obstacles for Germany's economic recovery.
US-Israel war on Iran threatens Germany' economic recovery: expert
