Germany could enter a recession by the fourth quarter of 2019, but this could prompt a key period in the continent's economic evolution that could ultimately benefit the region, according to one investment bank.

Seen as the traditional growth engine of Europe, German politicians called for strict austerity measures in southern Europe after the euro zone debt crisis of 2011. But with the country now experiencing its own economic woes, Denmark's Saxo Bank believes that Berlin could kick start spending and investment and radically change Europe's economic environment.

"It's gets them back in the game," Steen Jakobsen, chief economist and chief investment officer at Saxo Bank, told CNBC's "Squawk Box Europe" Tuesday. He highlighted that a rise in populist parties at EU elections in May, the impending departure of Angela Merkel as chancellor and a change of presidents at the European Central Bank (ECB) would all accentuate this dramatic shift.

"We firmly believe that any macro change has to come from a breakdown or a crisis, and as such we see 2019 and 2020 as key years for Europe's evolution … Germany grew too complacent, and so did the EU as a whole. Now the new reality has to see Berlin expand spending to be of benefit to the rest of Europe. Overall, a new common ground will be found from a more fragmented Europe," the Danish investment bank said in its latest quarterly outlook.

Germany has been catching economists' attention since it posted a contraction in growth in the third quarter and then flat growth in the fourth quarter of 2018, narrowly avoiding a technical recession. The growth slowdown has been attributed to upheavals in the nation's traditional growth driver, its car industry, and a wider global slowdown affecting demand.