Heiner Flassbeck: Germany is in recession – and that is extremely dangerous!

In the past, there were already recessions in the economy. These were phases of shrinking gross domestic product (GDP) that lasted two, three quarters or a whole year. Rising unemployment and shrinking incomes were practically always the result. And monetary policy always had to lower interest rates and the state had to intervene by increasing its own (debt-financed) spending if it wanted to prevent worse, namely a total crash.

To take away the horror of this phenomenon, the “technical recession” was invented a long time ago. If GDP falls for two quarters in a row, it is called a technical recession. But since it does not matter whether GDP falls twice by 0.1 percent or twice by five percent, this categorisation says nothing at all. What always matters is whether there are forces that counteract a crash once it is underway and prevent a very big crisis.

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