Recession looms as Iran war chokes growth

Germany’s new tank brigade in Lithuania has carried out its first combat exercise in the Baltic state.

Commander Christoph Huber said the drill in Pabrade marked a key step toward combat readiness.

Huber said the unit is learning from developments in Ukraine and must prepare for future conflict scenarios, not past wars.

Germany has set up the brigade in response to what it sees as a growing threat from Russia. The unit is due to reach full strength of about 4,800 soldiers and 200 civilian staff by 2027. Lithuania borders Russia’s ally Belarus and the Russian exclave of Kaliningrad.

Around 2,900 troops and 800 vehicles from eight NATO countries have been taking part in the exercise at the Pabrade training ground, about 15 kilometers from the Belarusian border.

The Bundeswehr has also deployed more than 300 drones as part of the drills, reflecting lessons from modern warfare.

Germany’s International Aerospace Exhibition (ILA) air show opened in Berlin on Wednesday.

This year’s show has been overshadowed by the recent scrapping of a Franco-German fighter jet project.

German Chancellor Friedrich Merz and French President Emmanuel Macron said that manufacturers Dassault and Airbus had failed to resolve key disputes.

The Future Combat Air System (FCAS) program, launched in 2017, aimed to build a next-generation fighter to replace Eurofighters and Rafales by around 2040. It would have been one of Europe’s largest defense projects.

The project’s failure is a blow to European security cooperation efforts and highlights the difficulties the continent faces in coordinating on military and defense initiatives.

It also comes as Europe seeks to boost its defense capabilities amid the threat from Russia, strained US-NATO ties and the ongoing war in the Middle East.

At the ILA on Wednesday, Merz said German and French defense ministers would ‌outline ⁠a ⁠reworked collaboration project between the two neighbors on air defense data networks by July.

“Our defense ministers will ​now ‌work out how this can be implemented in the run-up ‌to the next Franco-German intergovernmental ‌meeting ​in Germany, which we will be holding in July,” Merz said ​at the Berlin air show.

The pledge to focus on a “combat cloud” — data networks between warplanes and related software — comes after the flagship FCAS project was abandoned this week.

Eight companies, led by Airbus, are set to unveil a new plan for next-generation European fighter jets at the ILA on Thursday, to replace the FCAS, according to the AFP news agency.

A court order allowing police surveillance of the German suspect in the Madeleine McCann case has not been extended.

Police in the northern city of Kiel said Wednesday they have appealed the decision, with a ruling still pending.

A spokesperson said surveillance of Christian B. remains approved until July 12 at midnight. A further extension beyond that date was rejected, though no reasons were given.

B. remains a suspect in the case of Madeleine McCann, a British girl also known as “Maddie” who disappeared in 2007 at the age of 3 while on holiday with her family in Portugal. Her disappearance sparked a global search and is still unsolved.

Other court measures remain in place, including electronic monitoring requiring him to wear an ankle tag to track his movements. Police declined to give details of the surveillance for operational reasons.

The suspect, who has multiple prior convictions for sexual offenses, was released from prison in Lower Saxony in September after serving a seven-year sentence, including for rape. The conviction was unrelated to the McCann case.

He is currently living in municipal accommodation in Kiel.

Eight German states have been warning that planned health reforms could hurt university hospitals.

Ministers from Baden-Württemberg, Berlin, Brandenburg, Hesse, Mecklenburg-Western Pomerania, Lower Saxony, Saxony-Anhalt and Schleswig-Holstein said the draft law could weaken the financial base of key parts of the health system.

The bill to stabilize public health insurance is due for its first reading in parliament on Friday. It aims to close funding gaps with spending cuts and stricter rules for insurers.

Mecklenburg-Western Pomerania’s science minister, Bettina Martin, said limiting payments while costs keep rising would leave hospitals short of money. She warned they may have to cut services or delay care, putting pressure on patients.

The states said the goal should be stable funding and strong care, not added pressure. They called for changes to hospital funding, less bureaucracy and more support from tax money.

Police in Hamburg say three children were injured in a traffic accident outside a school in the city’s affluent Blankenese district.

According to the police, the children were hit by a car driven by a 75-year-old woman during a parking maneuver.

Police said two children, aged 7 and 10, were taken to a hospital for further treatment. One of the children had suffered a broken arm. A third child, also 10 years old, was released into the care of his father after receiving treatment at the scene.

The woman had driven a child to the school. Police stated that they are investigating whether she might have confused the accelerator with the brake pedal.

German Chancellor Friedrich Merz has been set to follow Germany’s World Cup opener from home, expecting a “clear win” against debutants Curacao.

A government spokesperson said he would watch Sunday’s match “like millions of football fans in the country, with plenty of passion,” according to the Funke media group.

While Merz plans to follow the tournament on TV, the government’s Minister of State for Sport Christiane Schenderlein is planning to attend Germany’s second group game against Ivory Coast in Toronto on June 20.

German authorities have been cracking down on a suspected international drug trafficking network in coordinated raids.

Investigators led by the Federal Criminal Police Office (BKA) carried out searches across the states of North Rhine-Westphalia and Hesse, arresting one of the main suspects. An operation also took place simultaneously in Bulgaria.

Prosecutors said the arrested man is strongly suspected of armed cannabis trafficking and large-scale commercial drug dealing.

Officers from the BKA, police, tax investigators and prosecutors in Varna seized extensive evidence, a firearm, €20,000 ($23,75) and a significant quantity of illegal drugs.

Authorities said the suspects, aged between 26 and 63, are believed to have run a network of companies to smuggle drugs from South America and Thailand into Germany.

Investigators have been stepping up efforts against cross-border drug networks.

Germany is facing the possibility of a recession as an energy price shock triggered by the Iran war weighs on growth.

Economists at the DIW Berlin say that output is likely to shrink slightly in the spring and summer quarters.

Two consecutive quarters of contraction would meet the definition of a technical recession. The economy is expected to stabilize toward year-end, supported by government spending.

DIW chief economist Geraldine Dany-Knedlik said any growth this year would be driven solely by the public sector. The institute now forecasts 0.5% growth for 2026 and 0.8% for 2027.

That marks a downgrade from March, when DIW expected 1.0% growth this year and 1.4% next year. Dany-Knedlik said the energy shock was slowing the recovery “noticeably” but added it was not comparable to the crisis of 2022–23.

“The shock is smaller, energy supplies are still secure, and Germany is now less dependent on fossil fuel imports than it was after the start of the Ukraine war,” she said.

Higher defense spending and delayed investment from government funds for infrastructure and climate neutrality are expected to provide limited support. Private consumption is recovering only slowly, while export-driven industry remains weak amid structural challenges and global uncertainty.

In a downside scenario, the economy could shrink by around 0.5% in 2026.

Germany’s economy has been navigating multiple shocks in recent years, from the war in Ukraine to supply chain shocks.

Guten Tag from the DW newsroom in Bonn, where we’re learning to live with the closure of a busy bridge across the Rhine River after engineers found serious structural problems.

The Friedrich-Ebert Bridge normally carries more than 100,000 vehicles a day and is one of the region’s most important Rhine crossings.

The closure has caused major disruption for commuters and freight traffic, but it has provided a nearby ferry company with an unexpected rush of new business.

Meanwhile, there are fears that Germany is facing a technical recession as the effects of the Iran war begin to bite.

Stay with us for more of the news that Germany is talking about today.