One failure, one bailout — it’s business as usual in Germany, which is emerging as the most stricken of all the major global economies by the credit crunch and recession.

Excluding smaller economies like Iceland and Ireland (which had its credit rating cut for a second time in nearly four months yesterday), Germany’s financial system remains under enormous pressure, industrial output and exports have weakened again, companies large and small are failing or asking for Government help.

Australians might be bemused by the continuing argument over whether we are in recession: compared to Germany we have a healthy, vibrant economy, with strong (but greedy) banks, low debt and unemployment that will peak well below Germany’s.

At the moment the Japanese, US and UK economies would be at the top of anyone’s list where the damage from the crunch and recession has been greatest. But Germany is on its way to taking that unenviable title.

In fact if anything, the German economy seems to be sliding (sideways at best); the woes the country finds itself in are serious, more so given the continuing state of denial of the Government, which prefers to blame others and criticise central banks in other countries for stimulus spending.

The country faces national elections in September; the mood is grim, as it should be. Overnight saw news that exports fell in April and are now down a Japanese like 28.7% in the 12 months to the end of April, and industrial output fell in April, when many had expected it to steady.

Defaults, failures and appeals for help from companies at the heart of the economy are becoming commonplace.

Overnight Arcandor, the owners of the country’s second biggest department store chain called Karstadt (and a 53% stake in UK travel group, Thomas Cook) plus a chain of sporting goods stores and a mail order business, collapsed after the government rejected appeals for close to one bullion in Euros in state aid. Arcandor is likely to be broken up by its bankruptcy trustees, with the owners of the rival Metro group trying to buy the Karstadt chain to give it retailing supremacy in Germany. The European Commission has already expressed reservations about that plan.

And Heidelberger Druck, the world’s biggest printing equipment group, says it is expecting a state bailout to save it from collapse. The company has been hit hard by the recession, especially in the newspaper and printing industries as the slump and the new digital world wreak considerable damage on its sector. It wants 850 billion Euros of loans and state guarantees, a similar sum to that sought by Arcandor. Heidelberger’s future looks very grim, given the depression the world’s newspapers find themselves in as does the printing sector generally.

Porsche, the sports car group, has sought to sell 25% of itself to a Middle Eastern investment group in Qatar after its attempt to takeover Volkswagen failed and the Schaeffler-Continental group of car parts and tyre companies which resulted from a high priced takeover last year that came undone, is also pressing the Government for urgent aid. Both are looking at weak sales this year, despite a controversial support scheme from the Government.

Opel, the German arm of General Motors, will be sold to a Canadian/Russian group as part of the deal to try and save GM. There’s over 1 billion Euros of government aid, and probably more in that deal.

The German Government’s major assistance to industry so far (apart from banking) has been the 5 billion Euros to support a car scrappage scheme (for vehicles nine years and older) over the year to December. That has helped car production in Germany (but not exports), helped new car dealers, but has damaged used cars, the scrap metal industry, car repairs and hurt other retailers as consumers opt to buy new cars rather than new appliances.

Two years ago next month, a shock profit warning and then a rapid bail-out at IKB, a Düsseldorf corporate lender that had pushed into subprime mortgage investments, was the first sign of a deeper problem among German banks. Four other banks followed with bailouts, aid a or mergers. Last week the German Government all but nationalised the country’s second largest real estate lender, Hypo Real Estate of Munich which had chewed up 102 billion Euros in state help without stabilising the group.

The continuing fragility of the German economy, and especially its manufacturing heartland, was shown in the 4.8% fall in exports in April from March. The 28.7% fall in the year to April was the largest annual fall since 1950, when figures were first compiled. Industrial production and exports are the heart of Germany’s economy: they are the drivers behind the country’s powerhouse record as the world’s biggest exporter. But the world economy no longer needs as many manufactured goods and associated services. But no longer.

The Government also said industrial production fell 1.9% in April from with March, which was revised upwards to show a 0.3% rise, which surprised economists and increased the concerns that the economy had lurched downwards. April output was 21.6% down on April last year. News of the falls came after the release of figures on Monday showing a steadying in industrial orders in April, which had suggested a turn for better.

But Germany’s Economics Ministry thinks so, saying this week that “in view of the stabilisation in demand for industrial products and the trend change in confidence indicators, the chances have improved of a bottoming out in industrial production in the foreseeable future”.

That optimism came after the Bundesbank warned that the country’s economy would sink by 6.2% this year. Last December the central bank had forecast a contraction of just 0.8%.

The central bank said that the severity of the country’s recession had taken it aback.

Sharply revising down its forecasts for this year and next, the German central bank said it “…had not envisaged a downturn of this force, which is without historical parallel”. Europe’s largest economy had been hit by the “sharp slump” in global trade exposing Germany’s reliance on exports to power economic growth.

The Bundesbank’s latest forecast said that since the first quarter there was “much to suggest that the pace of the economic downturn will slow noticeably” and that the downward slide could “bottom out” in the third quarter of this year.

“A radical recovery looks unlikely in the near future,” it added. “This year will see barely any expansionary stimuli from abroad.”

The Bundesbank expects zero growth in GDP in 2010, a rise in the unemployment rate from 7.8% of the labour force in 2008 to 8.4% by the end of 2009 and 10.5% next year.

“More job cuts and a faster rise in unemployment may be expected in the coming quarters, however. Unemployment is likely to increase by more than 1 million to 4.4 million on an annual average in 2010,” the Bundesbank forecast.

The claims for state aid from Arcandor and Heidelberger Druck won’t be the last from German companies, large and small.