Germany, again the "sick" of Europe?

The numerous crises of recent years have made the weaknesses of the German business model visible. Industry and export with big problems.

It was just before the turn of the millennium when the British business magazine The Economist came to a devastating conclusion about the German economy. "Germany is The sick man of the Europe - the sick man of Europe. At the time, it sounded like a wake-up call even for German politicians, who, still drunk from the economically strong years after reunification, had rejected any reforms. These reforms were offset by the government of then Chancellor Gerhard Schröder (SPD), for example, with the labor market reform known as Hartz IV.

The situation changed for the better and this lasted for 14 years. A group of economists from Berlin and London wrote an essay on Germany entitled: From Europe's sick man to an economic superstar.

Deterioration of the condition and bad forecasts

But now the old expression "the sick of Europe" is making the rounds again. The German economy is failing to recover from the recent crisis. Economic production has stagnated in the first six months, which economists call "technical recession". In the last quarter, gross domestic product stagnated at the level of the previous quarter. While all important indicators lead to the conclusion that the German economy will decline during this year. This is also shown by the important business climate index of the Munich Ifo Institute. In July, the data of the survey with 9,000 managers of German companies was published, where it is said that "the situation in the German economy is getting darker" and that there will be a decrease during the year of 0.3%.

Ifo researchers are not the only ones who are confident that gross domestic product will probably fall again in the third quarter. This is also clear for Commerzbank chief economist Jörg Kramer: "Unfortunately, there is no improvement on the horizon," Kramer told the Reuters news agency. "Global interest rate hikes are influencing the situation, especially as German companies have problems with their location." Krämer's colleague Alexander Krüger of Hauck Aufhäuser Lampe Privatbank sees the situation similarly: "The problem is that economic output is still only at the pre-corona level."

"Germany is also held back by European economic cycles," says Jens-Oliver Niklasch of Landesbank Baden-Württemberg (LBBW).

Industry and its problems

Germany currently fares worse compared to other industrialized countries. According to the estimates of the International Monetary Fund (IMF), this year Germany will be the only country among the big countries that will experience an economic contraction. What worries the most is industry, which, at around 24 percent, makes up a large part of the German economy. The lack of orders from other countries is particularly noticeable in sectors that are heavily dependent on exports, such as mechanical engineering and the automotive industry. The important Chinese market after the corona pandemic is not recovering with the hoped-for momentum.

The companies are still doing well because of the previous orders, but it looks like these orders will be processed soon as well. While there are not many other orders – from March to May, for example, there were about six percent fewer orders than in the previous three months.

A whole range of reasons

The decline of the German economy has many causes. One of them is the monetary policy of central banks. Monetary watchdogs want to curb inflation by significantly raising interest rates. This makes loans more expensive for companies and consumers, which hinders and slows down the construction industry, which is also very important for Germany, and this also slows down companies' willingness to invest.

Other countries like France and Spain also have credit problems, but they are currently in better shape. "All our European neighbors have a dynamic of higher economic development," confirms Moritz Schularick, the new President of the Kiel Institute for Economic Research World Economy (IfW).

Gjermaninë e ngadalësojnë edhe disa probleme strukturore. Modeli dikur i suksesshëm i biznesit (importimi i energjisë së lirë – veçanërisht ruse – por edhe i lëndëve të para) nuk funksionon më. Krizat e shumta të viteve të fundit (korona, problemet në furnizimin me lëndë të para dhe me produkte, lufta e Rusisë në Ukrainë…) kanë nxjerrë pamëshirshëm në sipërfaqe dobësitë e ekonomisë gjermane. Lista e vështirësive vazhdon: Kompanitë po vuajnë nga kostot e larta të energjisë, ndërsa ato që kanë zhvendosur prodhimin në vende të tjera nuk po kthehen.

Kërkohen zgjidhje të guximshme

Një studim aktual nga DZ Bank i sheh kompanitë e mesme – të quajtura zakonisht si “shtylla kurrizore e ekonomisë gjermane” – si veçanërisht të rrezikuara. Autorët vënë në dukje një koktej të vërtetë të disavantazheve të vendndodhjes: përveç çmimeve të energjisë, përmendet mungesa e punëtorëve të kualifikuar, por edhe burokracia e tepërt, taksat e larta dhe një infrastrukturë e dobët e digjitalizimit. Përveç kësaj, Gjermania ka një popullsi të plakur. “Pjesë të mëdha të ekonomisë sonë nuk kanë besim se investimet do të shpërblehen për shkak të kostove të larta, si dhe rregulloreve ndonjëherë kontradiktore,” tha së fundmi Peter Adrian, President i Dhomës Gjermane të Industrisë dhe Tregtisë për Agjencinë Gjermane të Shtypit.

As Schularik writes in an article on his institute's website: "If Germany does not want to become the 'sick of Europe' again, it must invest boldly in sectors that can grow tomorrow and not try to make billions the euro preserves yesterday's industries."

According to Schularick, this also means quickly eliminating the deficits of the past decade and eliminating them. Most of all work should be done on: "Eliminating the backwardness in all digital areas, in creating state capacities and public infrastructure, building necessary housing and increasing the number of foreign workers to counter the impact on the economy of the aging workforce "./ DW