Germany is on the brink of a recession after leading economists cut its gross domestic product (GDP) forecast for the third financial quarter. Last week, the Institute for the World Economy (IFW) forecast Germany’s GDP could further contract by 0.3 percent from July to September – its worst figures in six years. The downturn comes after the EU’s largest economy slumped in the second quarter.
GDP fell by 0.1 percent in the three months from April to June.
An economic recession is triggered when GDP falls during two consecutive quarters or six months.
The IFW said: “Such weak figures were last seen in 2013 in the wake of the euro debt crisis.”
As fears another financial crisis is looming grow, leading economist and former Greek Financial Minister Yanis Varoufakis brilliantly explained the roots of the 2009 crash in a throwback speech.
During a debate at the Oxford Union in 2017, Mr Varoufakis hit out against Germany, who he claims irresponsibly lent copious amounts of money to the Greeks.
He said: “The total net export surplus of German industry between 2000 and 2008 was 2.3 trillion.
Yanis Varoufakis brilliantly explained the roots of the euro crisis
A board displays the closing numbers on the floor of the New York Stock Exchange (NYSE) on August 14
“There was a lake of euros, accumulating in the banks of Frankfurt, and the worst nightmare of a banker is to have money that they are not lending.
“So what did they end up doing?
“They lent it to the Greeks and to the Irish.”
Mr Varoufakis claimed that Greece did not bring “fantastic cars” into the eurozone like Germany, but had another amazing asset: low debt.
He explained: “92 percent of houses were owned by the residents.
“We didn’t have mortgages, we didn’t have credit cards – we had a very low level of debt.
“I know it sounds strange, but the greatest asset that Greece brought into the eurozone was a low level of debt.
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Growth rates in individual Euro area countries
Leading economist and former Greek Minister Yanis Varoufakis
“And collateral. We had low incomes, we were unproductive, slightly corrupt.
“All those things, but we owned our homes.
“You know what we were? We were the apple in the eye of German bankers
“A banker looks at you, you do not owe money to anyone, you own your own home, and you are thirsty for washing machines, German cars, imports.
“You are a wet dream for a German banker.”
The leading economist described how for the first couple of years everything was “fantastic”, for both the countries in surplus and those in debt.
However, Mr Varoufakis argued it was merely a fantasy, which burst into the open in Wall Street in 2009.
He continued: “For every irresponsible borrower, there is an irresponsible lender.
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Hungarian-born currency speculator George Soros
“But this is the structure of the monetary union, which lacks of a federal treasury.”
Mr Varoufakis is not the only financial expert who blamed the euro crisis on Angela Merkel’s Germany.
George Soros, the Hungarian-born currency speculator, claimed in an op-ed for the Financial Times in 2014, that the German Chancellor purposely called on European countries to bail out their own institutions, instead of creating some EU entity to handle the crisis.
He wrote: “Angela Merkel, Germany’s Chancellor, insisted there should be no joint EU guarantee: each country would have to take care of its own institutions.
Former Chancellor Angela Merkel
“That was the root cause of today’s euro crisis.
“The financial crisis forced sovereign states to substitute their own credit for the credit that had collapsed, and in Europe each state had to do so on its own, calling into question the credit-worthiness of European government bonds.”
Mr Soros also suggested that Ms Merkel might have not seen how it would be disastrous for the eurozone as a whole, because Germany is her homeland.
He explained: “As the largest creditor, Germany could dictate punitive terms of assistance, which pushed debtors towards insolvency.
“Meanwhile, Germany benefited from the euro crisis, which depressed the exchange rate and boosted its competitiveness further.”