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MOSCOW, September 3, Nadezhda Sarapina. The German economy is turning from a locomotive of Europe into a «sick man», write Western media. Dependence on the Chinese market, immigration, bureaucracy, an aging population — all problems are exacerbated. The government does not propose reforms that can improve the situation, and the Ministry of Economy does not believe in improvement, not only in the near, but even in the medium term.
It was not always like this
According to IMF forecasts, in the G7, only Germany expects a reduction in GDP, CNBC notes. And in the coming years, the German economy will grow more slowly than in the US, UK, France and Spain. Rating agencies confirm this. So, according to S&P Global, in August, the index of business activity fell to a minimum in three years — 44.7. However, some German businessmen are convinced that everything is under control. Holger Schmieding, chief economist at Berenberg Economics, points to record employment, a large number of vacancies and a better geographic location. While Allianz Senior European Economist Jasmine Groschl admits that Germany is in recession, she is sure that things are not so bad. -type=»photo» data-crop-ratio=»0.666666666666667″ data-crop-width=»600″ data-crop-height=»400″ data-source-sid=»ap_photo» title=»German Chancellor Olaf Scholz» class=»lazyload» width=»1920″ height=»1280″ decoding=»async» />
Everyone remembers the German economic miracle of the 1950s. GDP growth is ten to fifteen percent a year. By the 1960s, industrial production was second only to that of the United States. This was largely facilitated by a reasonable social program and the Marshall Plan, which provides for the supply of equipment and other assistance in the restoration of economic activity. As a result, the economy has excelled both in industry and agriculture.
“Of course, the neighbors wanted to take advantage of the situation. So Germany received obligations to the former members of the Council for Mutual Economic Assistance (CMEA),” financial analyst Mikhail Belyaev points out. On the one hand, this gave impetus to development, on the other hand, it became a colossal load, which determined the current problems.
Themselves to blame
Georgy Mikhaylets, a partner in the Payments and Transfers group of companies, explains that all the troubles are due to the fact that Berlin has prioritized politics to the detriment of the economy. «Moreover, this happened long before the current difficulties — when the country agreed to subsidize the weak European economies in the name of the status of the EU leader,» he clarifies. In addition, Germany is famous for social assistance programs, and this is an additional pressure on the budget.
A separate topic against this background is growing migration. Most come to the country for a better life, and the state gives them the opportunity to live without working. According to experts, the geopolitical decisions of NATO and Germany itself contributed to the influx of refugees. Wishing to preserve the image of right-wingers, the authorities do not dare to reconsider the issue.
The pan-European problem, the aging of the population, also makes itself felt. Every year the number of employees decreases, the burden on the pension system increases. Older citizens cost the economy dearly, and governments are trying to get people to work as long as possible. Former member of the European Parliament Notis Marias said that the process of raising the retirement age to 74 years has begun on the continent. «Many developed countries are experiencing this. Even where the issue is less acute on paper, everything is decided by first-generation refugees, and this group of the population does not contribute to economic growth,» says Mikhailets.
In addition, CNBC draws attention to the slow recovery of the Chinese economy after the pandemic, the volume of exports of cars, machinery, tools, chemicals and other key products has decreased. Among the main systemic problems are high corporate taxes, bureaucracy, lack of investment in road and digital infrastructure, and the energy crisis.
Bitter Medicine
The German Ministry of Economy and Climate Protection sees no chance for economic recovery even in the medium term. The fall in production and retail sales, inflation and difficult external economic conditions do not allow the country to get out of the hole. The government has not yet presented a comprehensive solution, said Joerg Kremer, chief economist at Commerzbank. And the proposed ways out of the crisis raise many questions.
For example, pension reform will not help increase the working capacity of older citizens. “Standing at the machine at 70 still won’t work, so people will simply switch to other social support programs. The German government cannot cut them, otherwise it will get a storm of protests,” Belyaev is sure. He sees a way out in the development of artificial intelligence technologies and robotization of production. 0.675082327113063″ data-crop-width=»600″ data-crop-height=»405″ data-source-sid=»ap_photo» title=»An elderly couple in Cuxhaven, Germany» class=»lazyload» width=»1920″ height =»1296″ decoding=»async» />
The reduction in gas prices did not make the industry any easier either. The problem is that Germany has lost long-term contracts and part of its infrastructure — the loss of Nord Stream and the closure of nuclear power plants intensify the recession.
According to analysts, the only way for Germany to «recover» is to develop a pragmatic approach to the economy. Establishing partnerships with Asia will ensure the development of the industrial and technological sectors, attract investors, and create a flow of labor migration. But for this you need to give up political ambitions when making decisions.