Massive contraction in the German Economy, making alarm bells ring in the EU

Reports are coming out stating that a massive 12 per cent contraction will hit the German economy in the coming months. This has started to ring alarm bells in the EU due to Germany being the “powerhouse” of the EU. Even though this contraction is significant, there are predictions that other EU countries will be far worse hit.

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With all this downturn, it does cast significant uncertainty on the whole EU project. If the powerhouses of the EU contract, it will become majorly stressful to bail out other countries at the same time, especially if their economic contractions are far worse. 

There is also significant concern from businesses in the EU that they won’t be able to recover properly due to the plans Merkel has under her time as the rotating president of the European Council. Nigel Farage explains Merkel’s itinerary saying: She wants to impose a financial transaction tax, put in place minimum tax rates across the European Union, have a harmonised corporate taxation so that no country like Ireland could choose its own lower corporate tax rate, and aim for an EU-wide Healthcare System.

Many economists say that the UK had a lucky escape from these rules due to us leaving the block last January. 

Victoria Hewson, head of regulatory affairs at the Institute for Economic Affairs, said the proposals underline the importance for the UK to have “regulatory autonomy” from the EU.

“A financial transaction tax has been on the EU agenda for a while,” she said.

“The UK and some other member states strongly resisted it, but there was always a risk that the UK could be outvoted under qualified majority voting and be forced to implement it.

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