LAre the Germans taken from the French evil? Doubt and self-flagellation seem to have gripped our neighbors across the Rhine, demoralized by the economic signs that accompany sluggish growth. According to forecasts by the International Monetary Fund, Germany should be the only G7 country to experience recession this year.
Inflation, which is higher than in France, partly explains this poor performance. Other causes are inherent in the German model: the decline in industrial production is more severely felt because the economy across the Rhine is more industrialized; competition, especially from China, in the electric car market is hitting Germany harder because of the importance of the automotive industry. The fallout from the Covid-19 period and the impact of the war in Ukraine particularly affects a model that draws its strength from exports. It is symptomatic that the two countries whose economies have benefited the most from globalisation, China and Germany, are having more difficulty than the others in restarting. The German economy is also, in Europe, the one that depends the most on China, an asset that has now become a handicap.
The British weekly The Economist drove the point home by asking the fatal question, this week on the cover: “Is Germany again the sick man of Europe?” “, awakening the trauma of a previous resounding cover which, in 1999, had decreed the same country “sick man of Europe”.
Late investments
No Schadenfreude here. The economies of the European Union are now so intertwined that a downturn in Germany is not good news for anyone. Berlin must be encouraged to react vigorously by taking the necessary measures.
Among these, the investment that the government has taken too long to make in infrastructure, digital and innovative technologies, particularly in the field of energy transition, figures prominently. Another handicap for the German economy is demographic; the country is aging, and unlike when the country’s economy was really sick, today the job market is under pressure, hampered by big labor shortages that immigration is called to compensate.
The German malaise is also political. The ruling coalition has already put in place a major mechanism to promote labor immigration, but it cannot ignore a major electoral trend: the far-right party Alternative für Deutschland (AfD) currently reaches 20% of voting intentions – another point that brings Germany, unfortunately, closer to France.
Some commentators dream of an ambitious economic reform plan, a reissue of the “Agenda 2010” which launched, under Chancellor Gerhard Schröder (1998-2005), the triumphant decade of the German economy. But the political landscape today is fundamentally different. Mr. Schröder’s Social Democratic Party (SPD) enjoyed a comfortable electoral support at that time, with 41% of the vote in 1998. The three parties which have shared power in Berlin since the end of 2021 (SPD, Greens and liberals) are all in the minority and are bogged down in endless negotiations. It is primarily up to their leaders to overcome this obstacle in order to regain the impetus and dynamism essential to the revival of the German economy.