Germany, Bundesbank flag recession, ready to spend 55 billion dollars

• The German central bank warned that the economy could contract for a second consecutive quarter, plunging the country into recession.
• The German government is studying ways to revive the world's fourth largest economy and avoid an economic crisis,according to Bloomberg.
• Finance Minister Olaf Scholz is ready to inject50 billion euros (or 55 billion dollars), cost of the last economic crisis to hit Germany.
• See the Markets Insider home page for more stories.

German authorities are reportedly considering ways to boost the world's fourth largest economy and create jobs, with the country's central bank having warned that it could fall into recession this quarter.

The German government is considering a fiscal stimulus package "designed to strengthen the national economy and consumer spending to prevent large-scale unemployment," according to Bloomberg, citing two people close to the issue.

This plan is probably a response to the contraction of the German economy by 0.1% in the last quarter – its slowest pace of growth in six years. The surprise contraction led to a recession, defined as two consecutive quarters of declining production.

See more: The German economy has just retreated, which means that Europe's biggest economy is on the brink of recession

Warm consumer spending, declining business confidence and declining foreign demand may cause a further contraction this quarter, plunging the country into recession, the German central bank said in its latest monthly report on Monday.

"The economic activity could also slightly decline during the quarter," said the Bundesbank. "While domestic consumption continues to isolate the economy, the job market is already showing signs of weakness and confidence in the service sector is also declining."

German Finance Minister Olaf Scholz said the government was ready to spend 50 billion euros ($ 55 billion) to revive the economy and fight the recession, estimated cost of the last economic downturn in the country.

"We have to be able to do it and we can do it," Scholz told reporters Sunday, Bloomberg reported.

The one-year trade war between the United States and China was one of the main drivers of Germany's woes. The dispute weighed on foreign demand for German equipment and other industrial goods as customers reduced their purchases due to the high uncertainty and high tariffs imposed on US-China trade.

Exports to the United Kingdom also suffered from Brexit uncertainty and companies that had announced major purchases before the Brexit deadline in March, slowed down activity. in the months that followed.

The German car industry, which supplies about 820,000 jobs and generates 5% of its GDP, also suffered from consumer reluctance to buy cars, the Bundesbank said. The country's auto production fell 12% in the first six months of 2019, according to the Financial Times.

At the same time, activity in the domestic construction sector has been spurred by a more lenient weather during the winter months, at the expense of summer, said the Bundesbank.