Real gross domestic product will probably decline again slightly in the first quarter of 2024, according to the March Monthly Report. The economy continues to experience headwinds from various directions. Domestic and foreign demand for German industrial products went down further. In addition, higher financing costs dampened domestic demand. Moreover, the available survey indicators still provide little evidence of an economic recovery for the coming quarter. 

Recent decades have seen the rate of firm entries and exits decline in the large euro area countries. This could explain the persistent weakness of euro area productivity. As shown in the Bundesbank’s latest Monthly Report, there are cyclical and structural reasons for the weak business dynamism – including demographic change and high levels of bureaucracy. The Bundesbank’s experts demonstrate that improving institutional and regulatory frameworks can help strengthen business dynamics and thus also productivity growth.

In an interview with Germany’s “Handelsblatt” newspaper, Bundesbank Executive Board member Burkhard Balz and Director General Digital Euro Alexandra Hachmeister explain why it is so important for Europe to have a digital currency of its own and why the digital euro is a top priority for the Bundesbank. Besides the geostrategic case for introducing a digital euro, they hope the digital euro will reduce the fees that merchants pay. The Bundesbank also has the issue of preventing money laundering in its sights, they note, with the introduction of a de minimis threshold being discussed in this regard.

Last year, the Bundesbank’s annual accounts were shaped by the increase in the key interest rates. For the 2023 financial year, the Bundesbank reports a balanced financial result because it was able to use its financial buffers to cushion burdens in the double-digit billions. To this end, the Bundesbank released its risk provisions in full and reduced its reserves. We expect the burdens to be considerable again for the current year. They are likely to exceed the remaining reserves, said Bundesbank President Joachim Nagel at the press conference presenting the Bundesbank’s annual accounts