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In its monthly report, the ministry named the issue, which broke
out almost two years ago after Volkswagen admitted to cheating
U.S. diesel emissions tests, as a threat to Germany along with
Britain's decision to leave the European Union and protectionist
trade policies by the U.S. government.
The car industry is Germany's biggest exporter and provides
about 800,000 jobs.
"Risks linked to how Brexit will shape out and future U.S. trade
policies remain," the ministry said. "In addition, the so-called
diesel crisis should be classified as a new risk to the German
economy even though its effects are not possible to quantify at
the moment."
Strong household and state spending provided most of the impulse
for the German economy in the second quarter when growth was
measured at 0.6 percent. Weaker net foreign trade dampened
growth, as exports grew strongly less than imports.
The ministry said it expected the industrial sector to continue
its upswing also in the third quarter, pointing to robust orders
and strong business sentiment indicators.
But the diesel crisis could cloud the German growth outlook, it
said, adding: "Given the importance of the automotive industry
they (the effects of the diesel crisis) must be classified in
the medium term as a risk to the overall economic development."
German politicians and car bosses agreed earlier in August to
overhaul engine software on 5.3 million diesel cars to cut
pollution and try to repair the industry's battered reputation.
EU antitrust regulators are also investigating allegations of a
cartel among a group of German carmakers, a measure that could
result in hefty fines for the companies.
(Reporting by Joseph Nasr; Editing by Toby Chopra)
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