2023-08-24 19:11:39
In 1999, British magazine The Economist made history. “Germany – the sick man of Europe” was the title of the magazine and coined the term for years of debate about Germany’s competitiveness, which culminated in the Red-Green Agenda 2010. Today, 24 years later, the prospects are also bleak. The economy is stagnating and inflation remains high at 6.2 percent. According to a forecast by the International Monetary Fund (IMF), Germany is the only country in the G-7 group whose economy will shrink this year (by 0.3 percent). Added to this are structural problems such as a shortage of skilled workers, high energy prices, ailing infrastructure and lame digitization. This is not without consequences for the European neighbors, who are economically closely intertwined with Germany. Many countries are not exactly enthusiastic about the current development.
Switzerland worried
In Switzerland, for example, there is concern about Germany’s low form. After all, the neighboring country to the north is one of the Confederation’s most important trading partners. Germany is by far the most important sales market for the export-strong Swiss machine, electrical and metal industry. That’s why Stefan Brupbacher, Director of the Swissmem industry association, looks to Germany “with great concern”. “If the industrial economy in Germany weakens, this inevitably has a negative effect on the business of many companies in the Swiss tech industry,” explains Brupbacher to the FAZ. In the second quarter, exports to Germany fell by 5.5 percent. A large number of Swiss industrial companies also have production capacities or at least a subsidiary in Germany. When asked where he sees the greatest need for action in Germany, the Swissmem director refers to his home country: “Switzerland has had good experiences not pursuing an industrial policy fueled by subsidies.” In the short term, structural change could be painful. In the medium and long term, however, this pays off through improved competitiveness.
Jan-Egbert Sturm, Director of the Business Cycle Research Center at ETH Zurich, agrees. More state and more state control are not necessarily the right way to solve Germany’s structural problems. “The economy needs clear rules within which it can shape its own future,” warns Sturm. The economist points out that Swiss industry is traditionally closely intertwined with that in Germany. In this field, the economic dynamics in both countries are almost synchronous; Deviations are usually due to the exchange rate development of the Swiss franc. However, the respective domestic economy and in particular the construction industry could develop differently. The latter shows tendencies towards a review in Germany, while it is still at a record level in Switzerland.
#consequences #neighbors