A deep recession in Germany, the euro zone’s biggest economy is now inevitable given the coronavirus crisis but public finances are well positioned to cope, the Bundesbank said in a monthly report on Monday.
Germany was already skirting a recession before the current crisis but now the domestic economy, which has propped up growth amid a global trade war, it taking a massive hit, the central bank said.
“The slide into a pronounced recession cannot be prevented,” the Bundesbank said, arguing that government measures could at least prop up confidence that the inevitable economic costs can be handled.
“German public finances are well positioned for this.”
Hoping to mitigate the long term cost of the recession, Germany is readying an emergency budget worth more than 150 billion euros (138 billion pounds) in the hope of maintaining jobs at businesses facing risk from the pandemic.
The European Central Bank has also promised to do its part though purchases of up to 1.1 trillion euros worth of euro zone debt this year, a move that should keep down borrowing costs for both businesses and governments.