Europe’s economic engine is sputtering yet again, and the outlook is getting worse with every day that the conflict in the Middle East drags on.
The German government cut its growth forecast for this year and next on Wednesday, squarely blaming the U.S.-Israeli war on Iran.
The conservative-led coalition of Chancellor Friedrich Merz now expects the economy to grow only 0.5 percent this year, down from a prior estimate of 1 percent. For 2027, it likewise trimmed its forecast to 0.9 percent from 1.3 percent.
“Economic developments in Germany will depend crucially on a resolution of the conflict in the Middle East,” the German economy ministry said in a regular update of its forecasts. “Even then, however, high energy prices, supply disruptions and economic strains are likely to persist for some time.”
