2023-09-05 19:58:05
Long dominant on the Old Continent, the German economy is now lagging behind. So much so that the expression “the sick man of Europe”, used by The Economist magazine at the end of the 1990s to qualify theGermanyresurfaced several weeks ago.
Germany should indeed be the only major industrial country to experience a recession in 2023, according to the International Monetary Fund (IMF). Its economy stagnated in the second quarter following two quarters of decline over the winter.
The reason ? When exports and industry cough, the whole of Germany catches a cold. However, these two pillars of “made in Germany” are particularly sensitive to the rise in prices and interest rates of the European Central Bank (ECB) which have slowed construction projects, as well as the difficulties of the post-Covid Chinese economy, Germany’s most important economic partner.
“Some 50% of our GDP comes from exports. Exports have made our wealth (…), but when the world economy weakens, Germany collects more than the others”, explained at the beginning of August the Minister of the Economy. , Robert Habeck, to the liberal weekly The timein an article reporting a “twilight atmosphere [qui] bathes the whole country”.
German industry has paid dearly for its dependence on Russian gas, stricken to the core following soaring energy prices in the wake of the war in Ukraine. High bills have hit the automobile, glass and metal industries hard. The burden of bureaucracy is also highlighted, as is the shortage of skilled labour, an aging population and too slow digitization of companies.
The car market, a symbol of German decline
The Munich Motor Show (IAA), which opened on Tuesday, symbolizes this German downgrade. A host of Chinese car manufacturers are the stars of this event where they overshadow German manufacturers. Having already supplanted Volkswagen, Mercedes or BMW in the electric motorization segment in China, they now aim to do the same on the European market.
“Competition should stimulate us, but not frighten us”, however urged the German Chancellor, Olaf Scholzduring his IAA keynote, which runs until the end of the week.
Especially since, contrary to a classic recession, the German job market is doing well: the unemployment rate was only 2.9% in May, well below the euro zone average ( 6.5%).
At the end of August, the German Chancellor announced a vast plan to revive economic activity, including a tax aid package of more than 7 billion euros per year until 2028. Access for young companies to capital markets will also be facilitated. The government’s plan also aims to reduce the bureaucratic burden surrounding building permits by using artificial intelligence. Berlin is also counting on the rapid adoption of a draft law on qualified immigration, supposed to settle labor shortages, and which still has to be voted on in Parliament. Finally, the coalition wants to guarantee companies a supply of energy at an affordable price, with subsidized prices but which are not intended to be established over time.
“This recession represents a chance to correct certain economic orientations”, judge Ernst Stetter, economist at the Jean-Jaurès Foundation, in an article published on June 8. “Between the state intervention desired by Chancellor Olaf Scholz and the desire of industry to have a free hand, there is an opportunity here to create a path for Germany’s ecological transformation by developing more technologies plants that the whole world will soon need vitally.”
However, economic circles were not enthusiastic regarding the catalog of measures presented by Olaf Scholz. If a law to “boost” growth is important to “improve the framework conditions for investments”, the measures “are still not able to remedy the weak growth in Germany”, declared Veronika Grimm in particular, member of the Council of Economic Sages, business daily Handelsblatt.
With AFP and Archyde.com
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