Certainly, let’s give this article a classic English touch, complete with proper subheadings and some added insights.
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The OECD’s Downgrade of Economic Forecasts for Germany and France
The Organization for Economic Cooperation and Development (OECD), based in Paris, has provided less-than-cheery forecasts for the economies of both Germany and France. On Wednesday, it revised its economic growth expectations downward for these two pivotal European nations.
Germany’s Challenges and Economic Outlook
Germany, the largest economy in Europe, will unfortunately lag behind the eurozone’s average growth rates. The OECD anticipates a modest growth of 0.7% next year, a reduction from the prior estimation of 1.1%. This is notably lower than the eurozone’s expected average of 1.3% in 2024 and 1.5% in 2025.
Recent political instability has exacerbated Germany’s economic woes. The ruling coalition, which had seen three parties at its helm, disintegrated last month due to disagreements over how to tackle the nation’s economic stagnation. These political quarrels came amidst high energy costs, dwindling investment, and weaker demand from critical foreign markets. The snap elections set for February do little to calm the waters.
However, all is not dour. Low inflation and rising wages are expected to bolster real incomes and spur private consumption. Moreover, the OECD foresees private investment gradually increasing, driven by high corporate savings and, mercifully, a gentle decline in interest rates. Yet, the ever-present policy uncertainty continues to sully investor confidence.
France’s Economic Predicament and Political Unrest
In neighbouring France, matters are hardly more optimistic. The OECD has readjusted France’s growth forecast to 0.9%. This reduced figure reflects the country’s current political and economic turbulence. Prime Minister Michel Barnier’s minority government teeters on the brink as parliament is set to vote on a no-confidence motion.
This political threat arose after Barnier forced through an unpopular budget, aimed at reining in the budget deficit, which stood at an estimated 6.1% of economic output for this year. The endeavour to shrink the deficit to a mere 3% by 2029 met with robust opposition. Notably, if lawmakers decide to oust Barnier’s government, further political turmoil could ensue.
This fiscal tightening plan involves tax hikes and spending cuts amounting to €60 billion, attempting to bring the deficit down to 5% by 2025. While designed to navigate the French economy into calmer seas, the plan has faced criticism for its harsh measures.
Global Economic Risks and Protectionism Warnings
In addition to the individual challenges faced by Germany and France, the OECD expressed concern over a worldwide threat: increasing trade protectionism. Trade barriers could severely disrupt the global economy. Of particular note is the impending assumption of office by US President-elect Donald Trump, who has pledged to impose tariffs on a variety of trade partners.
Such protectionist tendencies are a "downside risk" to global growth, even though the OECD has nudged up its 2025 global growth prediction to 3.3%, up by 0.1 percentage points. Enhanced trade restrictions could elevate costs, deter investment, stifle innovation, and ultimately impede growth substantially.
A study by consultancy firm Roland Berger estimates that countermeasures and US-imposed trade restrictions could cost over $2.1 trillion by 2029.
By focusing on both the regional challenges of Germany and France and broader international threats, this markdown format offers a comprehensive yet concise picture of current economic landscapes according to the OECD. The provided links can guide readers seeking a deeper understanding of these intricate topics.
