2023-09-06 06:28:10
The contrast with the Merkel years is striking. When the Chancellor left in 2021, everyone hailed an economically solid Germany that had come a long way, after having been described as “Europe’s Sick Man” at the turn of the century.
However, two years later, after a global pandemic and an invasion of Ukraine, the Germans are in high spirits. German Chancellor Olaf Scholz wants to reverse the trend, by presenting his government’s draft budget on Wednesday, September 6.
The recovery is long overdue
Long an economic engine of Europe, the country has not returned to its pre-Covid-19 level of growth. After two quarters of negative growth, its activity stagnated between April and June. Exports, which are central to this foreign-oriented country, are suffering from weak global demand. Household consumption suffered from inflation still at 6% in August. Industry is bearing the full brunt of the very high cost of energy, not to mention the collapse of the building sector linked to high interest rates.
“For now, the recovery of the German economy is still pending and will probably only start timidly”, sums up Guido Baldi, economics expert at the DIW Institute in Berlin. The forecasts for 2023 are indeed not very encouraging. The International Monetary Fund predicts a 0.2% decline in GDP, which would put Germany at the back of the pack in the euro zone, ahead of Estonia.
The specter of deindustrialization
As a result, the climate is deleterious, with very pessimistic and even alarmist views on a ” de-industrialization ” of a country which, precisely, has built its success on its industry. Having lost cheap Russian gas since the invasion of Ukraine, forced to decarbonize its economy to remain competitive and compete with China and the United States, particularly in electromobility, Germany would once again have become the“sick man of Europe”. Not to mention fundamental problems such as the aging of its population, the lack of manpower, the overwhelming bureaucracy, a laborious digitization.
A counterproductive tendency to self-flagellate
Faced with this, supporters of the coalition government bringing together Social Democrats, Greens and Liberals denounce a counter-productive tendency to self-flagellate. “It is true that we are not where we would like to be. But this will be a temporary phenomenon. To overcome it, we must have confidence in ourselves”notes Saskia Esken, leader of the Social Democratic Party to which Chancellor Olaf Scholz belongs.
“We call on the democratic parties in Parliament to work constructively instead of denigrating everything, especially government action, and fueling the prevailing bad mood”she points out.
The country has not said its last word
If the fears surrounding Germany’s ability to change its economic model are justified, the country has not said its last word. “It is precisely in industry, currently battered, that the German economy continues to have many assets”reminds Guido Baldi of the DIW. “These strengths will again manifest themselves more strongly in the event of a more robust recovery in the global economy”he dares to believe.
These assets include qualified employees, world-renowned engineering know-how and an active research and development division. “To say that the country is deindustrializing is an exaggeration, judge Jens Südekum, from the University of Düsseldorf. There is certainly a danger of creeping deindustrialisation, with investments which will perhaps not be made in Germany but in the United States for example. However, industrial production remains stable. We are not seriously ill yet, we are coughing. So we need a fitness program. »
How far should the state commit to help its industry?
The government of Olaf Scholz rightly recalls having approved record subsidies to attract foreign projects in sectors of the future such as semiconductors. Law on foreign labor, acceleration of administrative procedures in renewable energies, he also announced at the end of August tax relief of 7 billion euros for companies that will invest. Considered important but insufficient, these measures nevertheless raise a fundamental question.
How far should the state commit to help its industry? The debate divides the government itself, as shown by the idea of subsidizing the price of electricity for energy-intensive industries. A government procrastination which also feeds the ambient gloom.
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