2024-03-03 04:57:00
Germany was a powerhouse. She has become a hindrance. The largest economy in the euro zone, and the third largest in the world, continues to slow down, dragging the rest of Europe, France included, in its wake. After an already sluggish year in 2023, marked by a drop in growth of -0.3%, the worst performance of the top ten economies on the planet, the outlook for 2024 is getting even darker.
The Minister of Economy and Vice-Chancellor, Robert Habeck, did not mince his words on February 14: “The German economy is doing dramatically badly. » So much so that the number two in the coalition government (social democrats, Greens and liberals), led by Olaf Scholz, had to revise downwards his activity forecasts, from 1.3% to only 0.2%. for the current year. And at 1% in 2025, instead of 1.5% initially announced.
Germany: Olaf Scholz struggling, the far right in ambush
The turnaround of the export champion is not new. German GDP has only grown by 0.7% since 2019, compared to 4% for the European Union and 7.5% in the United States. The breakdown across the Rhine has repercussions on the EU and the euro zone. The European Commission has just corrected its growth estimates for 2024, to 0.9% in the EU and 0.8% in the euro zone in 2024, compared to 1.3% and 1.2%. “I am surprised that the state of the German economy is not commented on more in France, remarks Gilles Moëc, chief economist of the Axa group. Because it’s bad news. Germany represents a quarter of the eurozone’s GDP. It is also the leading destination for French exports, with 14% of the total. The diffusion effects of its slowdown are significant. »
“An obsolete model”
Among the causes, several structural elements. “The German model is obsolete. Dependence on global trade, with exports at 50% of GDP – 34% in France -, suffers from the decline in Chinese growth, Berlin’s first partner. notes Philippe Waechter, director of economic research at Ostrum Asset Management. The German automobile sector alone draws 40% of its revenues from China, which has become a formidable competitor. Another flaw is the weakness of domestic demand: the elderly population is saving more and more and spending less and less.
Rising energy costs caused by the war in Ukraine are making the situation worse. The bet on Russian gas, the disappointing results of investments in renewables and the closure of the last nuclear power plants in 2023 have caused the bill to skyrocket. Chemicals and steel, two of the main pillars, are very affected. BASF, one of the national giants, is struggling to maintain its Ludwigshafen site (200 factories and 39,000 employees). Its sales plunged by 21.1% last year, hence a cost reduction plan of 1 billion euros. And new layoffs, after 2,600 jobs lost since 2022.
Many companies are relocating, such as Miele, the manufacturer of household appliances emblematic of “German quality”, to Poland. Or the Swiss Meyer Burger, the leading European producer of solar panels, which is closing its Freiberg site to set up… in the United States. A catastrophic loss for the EU, to the benefit of Chinese manufacturers but at the expense of its sovereignty in the face of climate issues. “There is a real risk of seeing other groups leave across the Atlantic, alert Gilles Moëc. Much cheaper energy and massive subsidies with the anti-inflation plan are two strong arguments. » « The “Inflation Reduction Act” plan [loi sur la réduction de l’inflation de 2022] sharpens competition between more expensive production in Germany and an establishment in the United States favored by aid, adds Stéphane Colliac, senior economist at BNP Paribas. If CO emissions 2 across the Rhine are decreasing thanks to relocations outside Europe, Germany is losing out. »
In addition, the “debt brake”, this budgetary rule enshrined in the Constitution in 2009, which limits the deficit to 0.35% of GDP, was reinforced in November by the Constitutional Court of Karlsruhe. “It will prevent investments in the sectors of the future, including those essential for the climate transition,” fears Philippe Waechter. After removing aid for the purchase of electric vehicles, Berlin made an about-face in Brussels on the vote on a law concerning supply chains. A text that makes large companies responsible for child labor or forced labor outside the EU. And imposes on them a strategy compatible with the Paris climate agreement. “Their businesses are doing badly, but the fight against climate change is suffering the consequences,” regrets an expert from the European Commission.
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