As fears about U.S. commercial real estate roiled German banks this month, their message was clear: don’t worry, the vast majority of our property exposure is domestic. That may not prove the comfort it seems, Bloomberg News reported. While the country has so far avoided the rapid market corrections that rattled the US, experts argue that reflects arcane accounting practices shielding its lenders and investors from taking immediate hits.

The German and Dutch central banks on Friday posted multi-billion euro losses for 2023 and predicted more financial pain ahead, suggesting that they are unlikely to pay dividends into state coffers for years to come, Reuters reported. The European Central Bank and some of its largest national affiliates are generating large losses, depleting provisions and much of their equity, as sharply higher interest rates force them to pay out billion in interest to commercial banks.

The German government said Europe's largest economy was in “troubled waters” and slashed its growth forecast for this year as it struggles with a lack of skilled labor, excessive bureaucracy, high interest rates and lagging investment in new projects — while a relatively modest set of tax breaks for business remains blocked in the legislature, the Associated Press reported. The growth forecast was lowered to 0.2% from the previous forecast from last fall of 1.3%. That would follow a shrinking of the economy by 0.3% for all of last year.

Germany’s market for office buildings suffered its sharpest drop in two decades as higher financing costs and sluggish return-to-office trends soured investor appetite, Bloomberg News reported. The downturn accelerated in the fourth quarter with a 13% drop from the previous year, according to data published Monday by German banking association VDP. For the full year, prices slumped more than 10%, the most since records began in 2003, and the outlook is for further declines at the start of 2024.

For German banks at the forefront of a spreading US commercial property downturn, covered bonds and deposits can offer a lifeline, according to Barclays Plc analysts, Bloomberg News reported. Deutsche Pfandbriefbank AG and Aareal Bank AG have seen their unsecured borrowing costs grind higher as investors scrutinize their loan books for bad US loans. That makes it critical that they continue to be able to rely on more steady sources of funding. Deutsche Pfandbriefbank, known as PBB, said Wednesday that it had increased loan-loss provisions, noting “persistent weakness” in real estate.

German inflation fell in January to its lowest level since June 2021, dragged down by falling energy prices, likely leading to further calls for the European Central Bank to start cutting rates sooner, the Wall Street Journal reported. Consumer prices were 2.9% higher in January than the same month a year earlier, compared with 3.7% in December, measured by national standards, data from the German statistics office Destatis showed Wednesday.

Germany's support for a law requiring firms in the European Union to take action if they find their supply chains in violation of human rights has become doubtful after one of its ruling parties sided with business groups opposing the proposal, Reuters reported. German Finance Minister Christian Lindner, head of the pro-business Free Democrats, expressly criticized the law this week, echoing leading business associations' concerns that it creates considerable bureaucracy and legal uncertainties. "Now is not the time for an additional supply chain directive," Lindner said on Tuesday.

The company behind Signa’s flagship high-rise development in Hamburg filed for insolvency, further challenging efforts to restructure René Benko’s property empire, Bloomberg News reported. The company developing the 245 meter (800 feet) Elbtower notified the city of its request for creditor protection Friday, according to a statement from the municipality’s authority for urban development and housing.

Germany’s Galeria Karstadt Kaufhof department store chain is attracting interest from buyers looking to lap up assets hit by the insolvency of Rene Benko’s Signa empire, Bloomberg News reported. “There are more than two interested parties,” insolvency administrator Stefan Denkhaus said in emailed comments to Bloomberg, declining to give further details. A creditor committee is discussing the sale process and will swiftly proceed with negotiations, he said.