2024-07-31 18:53:31
Germany’s economy is stagnating. This puts one of the Chancellor’s promises in jeopardy – and at the same time his chances of being re-elected in the end.
Blue skies, sunshine, it’s neither too warm nor too cold, the capital is finally experiencing what many would call the perfect summer days. But something is tarnishing the paradisiacal appearance. To stay with the slightly hackneyed image: dark clouds are gathering on the horizon, a storm is brewing.
This is made clear by three figures, all of which were released in the past 24 hours and describe how bad the German economy continues to be: Contrary to expectations, the economy shrank by 0.1 percent in the second quarter; inflation in July was 2.3 percent, slightly above the June rate; and the unemployment rate rose to 6 percent in July for the first time since the Corona summer of 2020.
Hopes for a speedy economic recovery are dashed for the time being. At the same time, a promise made by the Chancellor is in jeopardy. And with it his last chance for possible re-election in autumn 2025.
In September 2023, Olaf Scholz (SPD) said in a newspaper interview that, thanks to investments in climate protection, Germany would experience growth rates like those during the economic miracle, “as last happened in the 1950s and 1960s,” said Scholz. At that time, the German economy grew by around 8 percent annually, almost no one was without a job, and there was full employment.
It should now be clear that this forecast is unlikely to come true any time soon. The mini-plus of 0.3 percent that was recently expected for the current year 2024 is shaky, and a second year of recession in a row is no longer out of the question. In addition, the entrenched inflation is likely to prevent the European Central Bank from further interest rate cuts, which in turn would be an important stimulus for companies – not least with a view to possible new hires and the labor market.
While in Europe almost all major industrial nations have long since reached their pre-coronavirus level of economic power and a clear upward trend can be seen, real growth in Germany has been hovering around zero for almost four years. Stagnation. Standstill.
The standstill is coming back to haunt him
Of course, the traffic light coalition and the Chancellor are not solely to blame for this development, which in reality is not a development at all. It was Scholz’s predecessors who first made us dependent on Russian gas (Gerhard Schröder) and who were then unable to free Germany from this dependence (Angela Merkel).
And yet the standstill will ultimately come back to haunt Scholz, even if next year few people remember his statements from autumn 2023. Because the Chancellor is speculating that the economy will be halfway humming again next year. And if that is the case, according to the Social Democratic narrative, then many will look more favorably on his first four years as Chancellor, and the SPD will fight its way back to the top – similar to the 2021 election campaign.
But with the economic downturn now looming, this scenario seems even more questionable than it already was. The economic situation may not yet be noticeable in everyone’s everyday life, but that could change next year.
If companies cannot pay higher wages due to the economic situation, but prices continue to rise at the same time and Germans then discover that things are better elsewhere when they go on expensive holidays abroad, things can quickly go wrong. The already gloomy mood is likely to worsen again and the political fringes will receive even more support. Then the storm will arrive. For Scholz, the SPD, but also for Germany as a whole.