Germany’s economic prospects have darkened and the likelihood of a “severe recession” next year has increased, the country’s top economic institutes said on Tuesday as they cut their joint 2009 gross domestic product growth forecast from 1.4 to 0.2 per cent.

The think-tanks also warned that matters could get even worse, with the possibility that the economy could shrink by 0.8 per cent in a recession comparable to that caused by the oil price shocks of the 1970s.