Germany threatens years of downturn in new banking crisis

Berlin Despite the recent unrest in the banking sector, the mood in the German economy is good. The companies are starting spring “with a good feeling,” reports the Ifo Institute, citing its own surveys. But the uncertainty remains: What if the problems in the banking sector worsen after all?

The employer-oriented Institute of the German Economy (IW) has played through the consequences of such a banking crisis, the simulation is available to the Handelsblatt. Accordingly, “a banking crisis Germany into a recession as early as this year,” says the study.

A crisis would therefore have far-reaching consequences for all areas of the German economy: Private investments would collapse, private consumption would decrease, the central banks in Europe and the USA would have to realign their interest rate policy. In the end, new turmoil in the banking sector would cost the German economy half a percentage point of economic growth this year and two percentage points next year.