Business organizations concerned
“Germany is on the losing road”
8/1/2023 7:46 am
Rising energy prices, fewer investments, a lack of skilled workers and strong dependencies: the German economy is stagnating. Leading associations look to the future with concern – and also blame the traffic light government for the crisis.
The German economy is stuck in a slump. The hoped-for spring upswing did not materialize. The gross domestic product (GDP) stagnated in the second quarter compared to the previous quarter, as reported by the Federal Statistical Office on the basis of preliminary figures. According to economists, the prospects for the coming months have also clouded over. The International Monetary Fund expects the German economy to contract by 0.3 percent this year. According to the spring projection presented in April, the Federal Government expects GDP growth of 0.4 percent for this year.
“Economically, Germany is on the loser road, especially in an international comparison,” said Industry President Siegfried Russwurm. “Unfortunately, the economic indicators are all pointing downwards, so completely in the wrong direction.” According to the current IMF growth outlook, the German economy is the only one of the 22 countries and regions examined in which the gross domestic product is falling in the current year. “This must alarm an industrial and exporting country like Germany,” said the President of the Federation of German Industries.
German economy in crisis
Substantial support from the political environment, especially in such a difficult situation, is still in short supply, Russwurm criticized. “It’s not just about money: we’re not making any progress in reducing bureaucracy. We’re not making any progress in speeding up approvals.” There is too little progress to get the energy system of the future and its costs under control. “I think politicians are slowly realizing that we’re not talking about a thriving landscape and a new economic miracle, but about a crisis in the German economy,” said Russwurm.
“If the answer from the federal government is that we are not making any additional money for this in the budget, it must resolve the conflicting goals within the federal government and the parties supporting it and clarify whether and how it is setting the right priorities.” Russwurm continued: “I’m afraid the suffering isn’t great enough. That’s an incredible shame because many developments are predictable. We could save ourselves a lot of pain, but it looks like it has to get worse first it comes to the necessary jerk, and then can get better again.”
According to Russwurm, there are concrete decisions that he can only shake his head at. Federal Minister of Economics Robert Habeck is proposing an industrial electricity price on the one hand, which should represent a bridge for the future, and on the other hand the Federal Government is canceling the peak equalization in the electricity price. This puts a huge strain on energy-intensive companies.
“mood is bad”
According to Jörg Dittrich, President of the Central Association of German Crafts, most companies are still doing well. “However, the mood is bad – even among those who are doing well economically. The cost increases due to higher material costs, inflation, wage increases and, above all, further rising social security contributions are enormous.” The competitiveness of the companies suffered as a result and their future prospects came under pressure. “The transformation will only be affordable if there are still enough solvent craft businesses.”
According to Dittrich, Germany is too bureaucratic, not digital enough and too slow, for example in the approval and planning processes. “What lies ahead of us is very challenging. If we don’t act and take countermeasures now – especially in the construction sector – then there is a risk of a long period of economic difficulties.”
Unfortunately, the traffic light coalition of SPD, Greens and FDP did not contribute to a positive mood in the country in the past six months, said Dittrich. “On the contrary, your sometimes impractical and hasty political actions have unsettled many, especially in the trades – especially with the Building Energy Act.”
Recession not over yet?
Employer President Rainer Dulger said: “We are in a recession. Inflation is also more stubborn than expected. We have some of the highest energy costs, we have some of the highest taxes and additional wage costs. We have a dilapidated infrastructure. These problems are mixed with a shortage of skilled workers , sleepy digitization and decarbonization. A doctor would speak of multiple diseases.”
The mood in companies is clouding over, the investment climate is not good. “Above all, we are currently not attractive for foreign investments, partly because we are a high-tax country. We are not an attractive location. We need investments in the location. Above all, Germany must become faster and more digital.” Fewer taxes and additional wage costs are also needed.