EUROPE'S largest economy Germany could crash into recession as car manufacturing growth plummets and Brexit cripples exports, its central bank has warned.
Bundesbank said that lower consumer spending and softer overseas demand has caused the economic downturn.
The bank said a slump in orders for cars in the second quarter of the year was likely to continue into the autumn.
Blaming a drop in exports, it also said Brexit and the trade war between the US and China were among the factors that contributed to a 0.1 per cent drop in GDP from April to June.
The bank said: "The overall economic performance could decline slightly once again. Central to this is the ongoing downturn in industry.”
Exports “were down substantially”, the bank noted, as pre-Brexit preparations ahead of the UK’s initial exit date at the end of March led to companies building up stocks in the first quarter.
Bundesbank added: "As things currently stand, it is unclear whether exports and, by extension, industry will regain their footing before the domestic economy becomes more severely affected.”
The overall economic performance could decline slightly once again. Central to this is the ongoing downturn in industry
Although economists have not yet predicting a Europe-wide recession, they have voiced fears that the European Union will not thrive while its power economy is struggling.
Germany accounts for more than a quarter of the EU's output, with its 83 million people.
Many of the bloc's countries count Germany as their number one trading partner.
This includes France, the Netherlands, Belgium, Slovakia, Sweden and Italy.
The risk of a recession is rather high
Katharina Utermöhl, senior economist at the German insurer Allianz, told the New York Times: "If the largest member state is affected, this will also start to weigh on the euro area as a whole because of the close economic relations.”
She added that, should Europe suffer more blows such as a no-deal Brexit, "the risk of a recession is rather high".
It comes ahead of Boris Johnson's crunch talks with Angela Merkel and Emmanuel Macron in Paris this week.
The PM believes Emmanuel Macron and Angela Merkel will cave and broker a new Brexit deal.
This is despite Brussels chiefs saying repeatedly they will not reopen talks over a fresh deal.
Speaking during a visit to a hospital in Cornwall yesterday, Boris told Sky News: "We will be ready to come out on Oct. 31 – deal or no deal.
“Of course, our friends and partners on the other side of the Channel are showing a little bit of reluctance to change their position – that's fine – I am confident that they will."
"I hope that they will compromise – they have seen that the UK parliament has three times rejected the Withdrawal Agreement, the backstop just doesn't work, it is not democratic. I hope they will see fit to compromise."
The PM has stated that we will be leaving the bloc “do or die” by the Halloween deadline and has won the backing of Brexiteers for his tough stance against Brussels – refusing to meet any EU leaders in person until now.
However, Boris has also said that brokering a trade deal with the EU is a top priority.
He said: “I want a deal, we are ready to work with our friends and partners to get a deal but if you want a good deal for the UK you must simultaneously get ready to come out without one.”
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