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Germany is struggling

  • 27 September 2023
  • Philippe Waechter
  • China
  • Energy
  • Germany
  • World Trade
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The German economy will be in recession this year. The GDP figures go in this direction and the cyclical indicators do not give any signals contrary to it. Yet Germany was on a very robust momentum after the great financial crisis of 2008. It raced ahead while her European partners came out groggy.

Since then, a lot has changed and Germany no longer has the panache or the brilliance. Five factors derailed this beautiful mechanism. It has to rebuild around Europe and its internal market. It will take a long time.

1- Great dependence on global dynamics and China in particular. The resulting enthusiasm and the quality of the products were incentives to invest less and renew themselves. Investment in information technology was half (% of GDP) compared to the US and France. This export bias has come at the expense of the domestic market, which is struggling to take over.

2- China is no longer a source of impetus for German foreign trade. In addition, German automakers are facing fierce competition from Chinese automakers while they have invested heavily in the Middle Kingdom. The strategy needs to be reviewed.

3- Cheap energy is history, the economy must adapt to this new framework and the industry must be more sober than in the past. This new situation changes the conditions of the competitiveness of the Mittelstand.

4- The coalition in power is no longer as radiant. The weight of the greens is quickly reduced in public opinion when ecological constraints affect everyday life (see the episode on the prohibition of gas water heaters). At the same time, AFD is getting stronger, surfing all the upheavals affecting Germany. Germany is seeking itself politically.

5- The population is aging and Germany needs to open up. It needs labor but also skilled people that it seems reluctant to welcome.

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  • Energy
  • Germany
  • World Trade
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