Germany’s economy could have contracted by as much as 2% in the final quarter of 2008, the country’s statistical office warned yesterday, deepening a recession that looks likely to be the worst since the second world war.

The sharp contraction in Europe’s largest economy would sound alarm bells across Europe because of Germany’s role as Europe’s economic powerhouse.

German exports had benefited from strong global growth in recent years “but now that process has gone dramatically into reverse”, said Andreas Rees at Unicredit in Munich.

Financial Times