Germany’s recession will have a major impact on the French economy

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A container ship will depart Hamburg Port (Northern Germany) on March 7, 2022.

Currently, major German economic forecasting agencies have agreed. Reducing Russia’s gas supply will lead the German economy into recession. Gross domestic product (GDP) will decline 2.2% in 2023, with cumulative losses on GDP in 2022 and 2023 at € 220 billion, or 6.5% of annual wealth, according to estimates by five economic institutions (DIWs). increase. , IFO, IfW, IWH and RWI).

What is the impact on the French economy? “There are infectious effects, especially through export channels. Germany’s recession will lead to a loss of French profits.”, Says Ana Boata, Director of Economic Research at Allianz Trade (formerly Euler Hermes). The contagious effect was even stronger as the economic ties between France and Germany were significantly strengthened from the crisis associated with Covid-19. Better : “” They have never looked so good. “ We welcome Patrick Brandmeyer, Secretary of the Chamber of Commerce and Industry Franco German.

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This is one of the concomitant effects of severe Chinese confinement, increased transportation costs, and supply chain congestion. Each country has sought to get closer to its suppliers and customers. Result: Trade between France and Germany increased by 12% in 2021 to reach € 165 billion. This trend continued for the first two months of 2022. In January and February, Germany’s exports to France increased by 9.2% and France’s exports to Germany increased by 13%.

Paradoxically, in the face of Germany’s recession scenario, the good health of this bilateral trade undermines France. “” In that case, the main route of transmission would be the export route. “ BNP Paribas economist Stéphane Colliac explains. The first sector affected? Automobiles, metallurgical products (2.8 billion), automotive equipment (2.6 billion) and even plastics (2.2 billion) account for 6.3% of exports to Germany each year. Pharmacies and agribusiness are also punished. “” In total, it’s a fair amount. Almost one-fifth of France’s total exports to Germany. Coliac continues. This could create a sectoral or regional crisis in France. »»

“Europe is punished”

According to Allianz Trade calculations, the “shortage” of French exporters is around € 15 billion. The shock could result in a loss of 0.1 points in GDP, estimates Matthew Plain, an economist at the French Economic Observatory. To this we need to add the “domino effect” from other German partner countries. This is also affected by the decline in demand in Germany. “Germany is everyone’s largest trading partner, so Europe as a whole will be punished.Philippe Waechter, Director of Economic Research, Ostrum Asset Management, recalls. This does not necessarily mean that we are all in recession, but it will brake economic activity and complicate the situation for the European Central Bank. »»

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