“Germany is wilting,” says The Economist. Last year its economy shrank by 0.3%, the worst performance in the G7. Industrial output has contracted by around 9% since 2018. In boardrooms, “the talk... is of creeping de-industrialisation”. The “underpinnings of Germany’s industrial machine” have been falling “like dominoes”, says Bloomberg. China, once an “insatiable buyer” of German goods, is now a direct rival in areas from cars to solar panels. The US is drifting into protectionism.
The end of “huge volumes of cheap Russian natural gas” has spelled the “final blow” for energy-intensive industries such as chemicals. “Germany still has an enviable roster of small, agile manufacturers,” but their ability to grow is being hampered by “political paralysis” that prevents reforms. Chancellor Olaf Scholz’s “fractious coalition” of social democrats, greens and free-market liberals struggles to agree on very much.
Manufacturing still accounts for 20% of German GDP, compared with 9% in the UK, says Roger Bootle in The Telegraph. Germany has come through weak periods before. With a government debt-to-GDP ratio of 64%, “extremely low” for a developed economy, Berlin has plenty of budgetary room to invest in badly needed upgrades to infrastructure, education and the digital economy. Yet “by law the German government is obliged to aim at something close to a balanced budget”. That keeps debt low, but it amounts to a huge “self-inflicted wound” for the future prospects of Deutschland Inc.
A play on global growth
Positive money news out of Germany has been rare of late, but the stockmarket is a notable exception, says Kristie Pla
