German economy hit hard last year

Germany’s economy contracted 0.5 percent in 2012’s fourth quarter. Above, a steelworker in Duisburg in December.

Ina Fassbender/Reuters

Germany’s economy contracted 0.5 percent in 2012’s fourth quarter. Above, a steelworker in Duisburg in December.

FRANKFURT — The economic stagnation in Europe has taken a significant toll on Germany, with government figures released Tuesday showing that the Continent’s flagship economy contracted in last year’s fourth quarter.

The Federal Statistical Office in Wiesbaden estimated that the German economy shrank about 0.5 percent in the final three months of 2012, compared with the previous three months. The decline was largely the result of sagging investment by German managers worried about the future of the eurozone.


And despite reassurances from economists that growth would bounce back quickly in Germany, the data underlined how closely the country’s fate remained tied to its ailing eurozone allies.

‘‘This idea that Germany is a powerhouse dragging the rest of Europe along with it is a bit of a myth,’’ said Philip Whyte, a senior research fellow at the Center for European Reform in London. ‘‘You have a very weak periphery, and a core which is not as strong as everyone seems to believe.’’

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

Within the region, Germany has served as a crucial counterweight to the struggling economies of Southern Europe, and helped stabilize the eurozone.

Despite the fourth-quarter contraction, a compilation of annual economic data by the statistical office showed that the German economy was in fundamentally good shape. ­Exports rose 4.1 percent during the year and 41.6 million people were working, a new high and the sixth annual increase in a row.

And the German government achieved a budget surplus for the first time since 2007, without having to impose the kind of austerity that has choked growth in France, Britain, and Italy.


For the full year, German GDP grew 0.7 percent after adjusting for inflation, much slower than in 2011 when the economy grew 3.1 percent, the statistical office said.

Loading comments...
Real journalists. Real journalism. Subscribe to The Boston Globe today.