Closing summary
Time to wrap up… here are today’s main stories
Germany is facing a winter recession after its economy shrank in the last quarter.
New official data showed German GDP fell by 0.2% in the October-December period, worse than expected, as the energy crisis and higher interest rates hit growth.
Analysts warned that Germany’s economic outlook is not too rosy, with ING’s Carsten Brzeski saying:
Not falling off the cliff is one thing, staging a strong rebound, however, is a different matter. And there are very few signs pointing to a healthy recovery of the German economy any time soon.
First of all, we shouldn’t forget that fiscal stimulus over the last three years stabilised but did not really boost the economy. Industrial production is still some 5% below what it was before Covid, and GDP only returned to its pre-pandemic level in the third quarter of 2022.
Industrial orders have also weakened since the start of 2022, consumer confidence, despite some recent improvements, is still close to historic lows, and the loss of purchasing power will continue in 2023.
Sweden’s economy also contracted in Q4, by 0.6%, while Belgium managed modest growth of 0.1%. We find out tomorrow how France, Portugal, Italy and the wider eurozone fared…..
Investors are bracing for interest rates in major economies to hit their highest levels in around 15 years this week.
The Bank of England and the European Central Bank are both expected to raise their key interest rates by half-a-percent, while the US Federal Reserve may restrict itself to a quarter-point hike on Wednesday.
Here’s the rest of today’s main stories:
The European Union is to loosen state aid rules on tax credits for renewable energy projects, as it responds to America’s Inflation Reduction Act with its own subsidy support.
European policymakers have been under pressure to respond to the US president Joe Biden’s $369bn (£298bn) IRA, which aims to encourage renewables investment in everything from electric cars to wind turbines.
The European Commission plans to loosen state aid rules to enable investment into production facilities in green industries, according to draft plans.
EU member states are divided over whether to introduce the new rules and how long for, according to the Financial Times, which first reported the plans.
More here:
The president of the European Commission, Ursula von der Leyen, told the World Economic Forum in Davos this month that new law targeting the region’s green industries were being drafted, in a bid to make Europe the home of clean tech and innovation.
