Europe’s heavyweight

Germany is in recession but still remains indispensable to Europe [View in browser]( [Bloomberg]( When Berlin sneezes, the rest of Europe checks its pulse. Today’s revision lower of Germany’s first-quarter growth figures put Europe’s biggest economy into a winter recession that will inevitably drag down growth in the 20-nation euro area. It’s doubly frustrating for policymakers since the continent had shown signs of surmounting the worst inflationary effects of Russia’s war on Ukraine, Moscow’s weaponization of energy supplies included. Key Reading: [Germany Endures First Recession Since Covid on Consumers]( [Germany Buys Tanks, Howitzers in Jumbo Defense Order]( [Germany Sees End in Sight for Putin’s “Imperialism” in Russia]( [Germany Pushes to Expand Startup Incentives By End of Year]( [Europe Is Successfully Replacing Its Lost Russian Diesel Supply]( Weakness in Germany, the world’s fourth-biggest economy, is like an icy blast to those tentative shoots of spring optimism. If that weren’t enough to vex fellow European Union governments, the endless bickering of Chancellor Olaf Scholz’s three-way coalition should be. Discord over issues from the budget to a relatively arcane law on cleaner heating has hurt support for all three parties, especially the Greens of Robert Habeck, the vice chancellor and economy minister. Political volatility in the EU’s heavyweight nation isn’t helpful to anyone as the bloc vies to project unity in the face of Russia’s aggression while navigating the challenge from China and the standoff between Washington and Beijing. Yet even six months ago, heading into what looked like a hard winter without Russian gas, most would have embraced the prospect of a brief recession. The coalition has an overwhelming interest in holding together and will surely serve out its term. And after initial prevarication that riled Europe and the US, Germany is now a leading contributor of military, financial and humanitarian aid to Ukraine. There’s no denying the challenges ahead, economic and political. But the reality is Scholz and Habeck are feeling their way through a remarkable set of interlinked crises for which there is no guidebook. As the continent’s undisputed giant, Europe knows that its fate rests on Germany, in sickness or in health. — [Alan Crawford]( A Leopard 2 A6 battle tank destined for Ukraine during a live-fire presentation in Augustdorf, Germany, on Feb. 1. Photographer: Alex Kraus/Bloomberg Listen to our [Twitter Space discussion]( on what is next for India and Prime Minister Narendra Modi as he chairs the Group of 20. Check out the latest [Washington Edition newsletter](. You can [sign up]( now to get it in your inbox every weekday. And if you are enjoying this newsletter, sign up [here](. Global Headlines Republican House Speaker Kevin McCarthy expressed optimism a deal on raising the US debt ceiling will be reached in time to avert a default. But hours after negotiators met, Fitch Ratings placed the United States’ AAA [credit score on watch](, signaling growing unease. The US received a downgrade in 2011, during a similar standoff when Republicans demanded President Barack Obama cut spending in exchange for an increase in the debt limit. - US voters blame Republicans and Democrats equally [along partisan lines]( for the standoff, a series of new polls shows. Florida Governor Ron DeSantis officially launched his [2024 presidential campaign](, signaling he will lean into culture war issues to wrestle the Republican nomination from Donald Trump. In a Twitter Spaces event with its owner Elon Musk that was delayed by technical issues, DeSantis enters the race as the strongest challenger to the former president and current GOP frontrunner in most polls. - Despite Trump’s [commanding lead]( over his rivals, Republican donors and strategists would prefer almost any other candidate because of issues including his governing record, the Jan. 6 failed coup and legal entanglements, among them being found liable for sexual assault. - A US special counsel is wrapping up an [investigation]( into Trump’s refusal to return classified documents after his 2020 election defeat and is poised to announce possible criminal charges, sources say. The global oil map is [being redrawn]( as the long-run impact of Western sanctions channels more barrels from Russia to Asia’s largest economies, with China also taking crude from Iran and Venezuela, according to data tracked by intelligence firm Kpler. Combined imports by China and India from the three countries has risen to 30% from 12% in February 2022, the month Russia invaded Ukraine. Chinese leader Xi Jinping has molded the world’s No. 2 economy to his vision. But under his watch, China’s internet sector has also been put through a punishing, two-year crackdown curbing the excesses of so-called disorderly growth of capital. Now an intensifying struggle for tech leadership with the US and a sputtering domestic economy suggest he’ll have to [once again recalibrate]( the country’s giant internet and manufacturing sectors. Best of Bloomberg Opinion - [Xi’s Quest for Security Is Costing China Too Much: Minxin Pei]( - [What Exxon Won’t Say About Climate Costs: Gongloff & Denning]( - [Yes, DeSantis Can Recover and Win: Jonathan Bernstein]( Food manufacturing sites have been destroyed, aid warehouses looted and markets razed in Sudan’s five-week conflict, according to satellite imagery analyzed by Bloomberg, fueling a growing [humanitarian crisis]( that has left roughly 20 million people in need of assistance. The United Nations expressed hope that vital aid will be delivered this week as a seven-day cease-fire takes hold between the country’s two warring generals. A burnt out bank branch in southern Khartoum yesterday. Source: AFP/Getty Images Explainers You Can Use - [What’s Behind Lula’s Clash With Brazil’s Central Bank]( - [Why Turkey’s Erdogan Faces His First-Ever Runoff Vote]( - [Rishi Sunak Finds UK Inflation May Follow Him Into Election Year]( As Typhoon Mawar neared the coast of Guam this week, it also drew attention to an [uncomfortable fact]( of US military strategy: Many of America’s most strategic assets are in places increasingly threatened by the consequences of climate change. Considered one of the most critical US military installations in the South Pacific, the island extends US sovereignty 8,000 miles from Washington. - A Chinese state-sponsored [hacking group]( has stealthily gained access to infrastructure organizations in Guam and elsewhere in the US, with the likely aim of disrupting critical communications in the event of a crisis, according to Microsoft Corp. Tune in to Bloomberg TV’s Balance of Power at 5pm to 6pm ET weekdays with Washington correspondents [Annmarie Hordern]( and [Joe Mathieu](. You can watch and listen on Bloomberg channels and online [here](. News to Note - Ukrainian President Volodymyr Zelenskiy said Russia may be [switching]( to so-called mixed strikes with varying types of drones and missiles as the nation’s air defense shot down 36 loitering drones today. - The US and South Korea are set to begin their largest-ever [live-fire drills]( today near the border with North Korea, which has threatened retaliation against the two nations. - Thailand’s Move Forward Party said at least 19 senators have [pledged support]( for Pita Limjaroenrat’s bid to become prime minister, boosting the chances of his pro-democracy coalition taking power. - Biden is [nominating]( General Charles Q. Brown Jr. as the [next chairman]( of the Joint Chiefs of Staff, seeking to elevate the Air Force leader to become the nation’s most senior military officer. - Bangladesh’s government pledged to [ensure free and fair]( general elections next year just as the US unveiled a policy to deny visas to citizens seen as undermining democracy. And finally ... Spanish government ministers are spending a lot of time in Barcelona, reflecting a delicate political balance as Prime Minister Pedro Sanchez tries to keep power in a general election due in December. Victory in the Catalan city in regional voting this weekend would see his Socialists regain an [electoral bastion]( lost to pro-independence forces during Europe’s debt crisis. As [Alonso Soto]( writes, it would also vindicate the premier’s risky strategy of rapprochement with the separatists despite resistance from within his party. Protesters on the sidelines of a Franco-Spanish summit in Barcelona on Jan. 19. 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