Professor Clemens Fuest, President of the Ifo Institute for Economic Research, told Express.co.uk the worst case scenario, of the UK leaving the EU without a deal in place, either by accident or design, remained very much a possibility.
And with the likely loss of the UK’s £9billion net contribution, Prof Fuest also stressed the need to make the EU more “cost effective”.
The Ifo’s Business Climate Index is regarded as one of the key indicators for economic activity in Germany, and consists of a monthly survey of 7,000 participants from firms in manufacturing, construction, wholesaling and retailing.
Each month the responses are evaluated, with the final figure reflecting business confidence. The most recent figure, 95, is slightly up on the previous total of 94.7, but Germany’s economy is nevertheless regarded as being in a precarious position – partly as a result of ongoing Brexit uncertainty.
Prof Fuest claimed Germany was watching events in the UK anxiously, he said: “The worst result for Germany would be a majority that seeks a Brexit without a deal or accidentally allows it to happen.
“In fact, in the case of a parliament without a clear majority this could happen.
“A Brexit without a deal would continue to burden the German export industry, which is suffering from a weak economy anyway.
“The car industry would be hit the hardest.”
He added: ”We are experiencing a slowdown in growth but not a recession.
“Demand for German industrial products, especially cars, is weak.”
Striking an optimistic note, Prof Fuest added: “In 2020, we expect a slight stabilisation and GDP growth of 1.1 percent.”
However, he warned: “This is based on the assumption that there is no hard Brexit.
“If it happens, the growth is likely to be even lower. However, it is unlikely that it will slip into negative territory.”
Turning his attention to the future of the EU, Prof Fuest said: “The EU should focus on developing new initiatives in policy areas where it can be more cost effective and be able to act more effectively than Member States.
“These include migration policy, military procurement, development aid, cybersecurity and much more.
“We do not generally need more Europe, but we do need more Europe where European action creates added value.
“It will not always be easy to convince all Member States to participate.
“Therefore, flexible cooperation must also be possible in smaller groups, also while including the United Kingdom after Brexit.”
Politics in Germany has been characterised by political turmoil in recent months, with Chancellor Angela Merkel’s heir apparent Annegret Kramp-Karrenbauer threatening to quit as leader of the Christian Democratic Union (CDU) if she does not get more support from her own party.
Meanwhile, while the Social Democratic Party (SPD) is on the verge of choosing a new leader, whose first decision will be to decide whether to pull out of the coalition which props up Mrs Merkel’s Government, a move which would likely force another general election.
Prof Fuest said: “I do not see that an end to the coalition would be a problem for the economy.
“I rather see an opportunity for a political new beginning in a different constellation.
“New elections do not necessarily mean political instability. However, I suspect that the SPD will remain in the coalition, if only because their electoral chances are currently rather poor and many in the SPD are hoping that it will look better in two years’ time.”
