German Economy Lags in Second Quarter

Germany’s economy slowed to a crawl during the second financial quarter this year, registering only 0.1 percent growth during that time and dampening the optimism that Germans felt after an exceptionally strong first quarter.

Reports of the flagging German economy, the GDP powerhouse of Europe, came just before German Chancellor Angela Merkel was to meet with French President Nicolas Sarkozy to discuss new ways to restore confidence in the euro.

At just 0.1 percent growth in the quarter, Germany has fallen behind even the United States, bipolar stock market and all. —BF

The Financial Times:

With worries rising about global growth and even double-dip recessions in some countries, Germany’s growth performance is crucial. The slowdown will make Berlin still twitchier about extending financial help to distressed eurozone countries. On top of moral objections towards helping the imprudent will be worries increasing contingent liabilities as public finances become more stretched.

The risk is of a vicious circle: that Germany’s perceived fiscal rectitude escalates further the eurozone debt crisis, resulting in shock to economic confidence that hits investment and job creation across the region – and beyond – weakening growth further in months to come.

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AP / Philippe Wojazer

French President Nicolas Sarkozy welcomes German Chancellor Angela Merkel at the Elysee Palace in Paris on Tuesday.