Recession looms as Iran war chokes growth

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.