Trade wars 'risk a global slump'
The head of Germany's powerful industry association lashed out at Brexit and trade protectionism in the US and China in a Dublin speech yesterday, saying they risked tipping the world into recession.
The speech by Joachim Lang came hard on the heels of data that showed German manufacturing output had fallen by 0.6pc in July from June, largely thanks to a collapse in car production, which is 20pc below its 2017 peak.
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"The conventional assumption of a return to higher dynamism next year assumes away Trump, Johnson, Xi Jinping and other risks," Dr Lang, the director-general of the Federation of German Industries (BDI), said.
"In fact, Europe will find itself in recession next year if a hard Brexit takes place, and in a slow-growth situation if it can be avoided," he told the Institute of International and European Affairs.
Dr Lang, who said the BDI fully supports the backstop, added that the issue of president Donald Trump and Mr Xi's protectionism, as well as Boris Johnson's hard Brexit threat, marked the first time since the Second World War a recession had been "manufactured in Washington DC and London".
Germany, the largest economy in the European Union, is poised for a contraction in the third quarter of the year, setting it up for a technical recession, something Britain is expected to avoid despite the self-inflicted wounds of Brexit.
Most economists say that the malaise in Germany extends far beyond the trade wars and global economy, and that its metal-bashing economic model is outdated and in need of deep structural reforms after a decade in which its exports have piggy-backed on strong US and Chinese growth, a weak euro and cheap money.
Dr Lang said that proposals by the British government for regulatory divergence within the terms of a trade deal were a non-starter, a view that represents official German government policy.
"If we establish separate rule books in one single market, we create a double standard," he said.
"Again, a policy that lets goods and services flow into our market without any checks will put the level playing field at risk. Such policy is unsustainable."
Most projections show that Ireland will be harder hit by a no-deal Brexit than the UK, in terms of economic impact.
The Central Bank of Ireland says that a hard Brexit could crater growth here, cutting it from a projected 4pc next year to zero.
Germany will also feel the pain, especially as the UK is a lucrative export market for the likes of car maker BMW.