"The open German economy, which exports as much as 50 percent of its output, has been particularly hard hit by the U.S.-China trade war. According to the most recent official estimates, German industrial production has declined by around 5 percent over the past year, which is Germany’s worst industrial performance since the 2008 economic recession. This would suggest that Germany might now already be experiencing an economic recession.
Judging by Angela Merkel’s repeated insistence that Germany must adhere to its balanced budget policy, there is the real risk that the full burden for supporting the German and European economies will once again be placed on the ECB. There is also the risk that as the rest of the European economies weaken, Germany will insist once again that those economies must pursue pro-cyclical fiscal austerity policies. Such policies would only deepen the European economic recession.
The trouble with again placing an undue burden on the ECB for supporting the European economy is that it would heighten the likelihood that the United States will soon deliver a further body blow to the fragile European economy. The United States would do so by following through on its threat to impose a 25 percent import tariff on European automobiles in response to any further Euro currency weakening that would result from an easier ECB monetary policy stance."