Germany, known as the "locomotive" of the European economy, is no longer majestic.
In 2023, Germany is the world's worst-performing major economy.
In 2024, the good news has not come, and even the latest data and research show that the difficult situation of the German economy will continue, and there is little hope for improvement.
Twenty-five years ago, due to the shock of reunification, the rigidity of the job market and the slowdown in export demand, Germany's economy was severely weakened, with double-digit unemployment rates and was once called the "sick man of Europe". Now, as the debate about whether Germany is once again the "sick man of Europe" has resumed, the pain caused by the failure of the growth engine is no longer limited to the economy, and calls for economic reform are constantly being heard.
A man refuels his car at a gas station in Berlin, the capital of Germany, where inflation rose to 7 during the coronavirus pandemic and Russia's invasion of Ukraine4%, a new high since German reunification in 1990. **Xinhua.
Economic data continues to be subdued.
In 2023, the German economy will shrink, extending the six-year downturn.
According to the German Federal Statistical Office, in 2023, Germany's annual gross domestic product (GDP) will fall by 03%。On an adjusted basis, economic performance fell by 01%。
Last week, Germany released several key data such as factory orders, exports and industrial production in 2023, which also showed that the economy is weak, especially since German industry is no longer a bright spot.
The data shows that in 2023, orders from German factories will fall by 59%, the number of large-scale orders has actually fallen to a post-pandemic low; Exports, the main cornerstone of the German economy, fell by 4 percent in December6%, down 14%；Germany's industrial output fell again, falling 1. month-on-month in December, due to weak performance in several manufacturing sectors6%, the seventh consecutive month of decline, and the year-on-year decline of 15%, with the largest declines in energy-intensive industries and energy.
The alarm sounded continuously. On Monday, the Bundesbank released its monthly report showing that the German economy will continue to shrink in the first quarter of this year, falling into a technical recession (two consecutive quarters of economic contraction) after negative growth in the previous quarter.
The International Monetary Fund said last year that Germany was the worst performing major economy in the world in 2023. Further, Germany will also be the slowest growing major economy in 2024, with an increase of only 05%。
More pessimistic people expect German industrial output to fall sharply for the second year in a row due to the impact of persistently high energy levels, high borrowing costs, and weak domestic and foreign demand.
The German economy has also been affected by the recent series of strikes, particularly in the field of railways and aviation. In mid-February, a Lufthansa ground staff strike caused chaos in the tourism industry; In January, train drivers went on strike over wage disputes; Farmers are also blocking roads in order to plan to cut subsidy ......
In a country once known for its strong laws protecting workers' interests, the outbreak of a general strike has only highlighted the economic woes.
Atrophy occurs due to a variety of reasons.
There are many reasons for the current recession in Germany, including a global slowdown, energy, and political uncertainty at home and abroad.
But at a deeper level, Germany's economic problems are also structural, from labor shortages and layers of bureaucracy to outdated physical and digital infrastructure, which are negatively impacting productivity.
The German economy is export-oriented. Since the 90s of the 20th century, Germany's exports have almost doubled as a percentage of GDP, much higher than those of Britain, France, the United States and other countries.
In a period of rapid globalization, exports have significantly boosted the German economy. But now, with the decline of globalization, the world** is no longer the growth engine of the German economy, and it can no longer rely on the demand of other countries to stimulate its own economy.
At the same time, Germany's economic model has long been focused on manufacturing, with the share of manufacturing value added (19) much higher than that of the United States (11) and more than double that of France and the United Kingdom (9%). While Germany has benefited from its strong industrial base for decades, high energy levels and the need to decarbonize the economy pose greater challenges today than countries with strong service sectors.
The construction of digital infrastructure is also holding Germany back. According to the latest report by the European Commission, only 19% of households in Germany have a fibre optic cable to connect to high-speed internet, compared to the EU-wide average of 56%.
The German automotive industry has long been at the top of the manufacturing industry, especially in the Chinese market, where car production peaked in 2017. Today, however, German car production is still below its pre-2008 pre-financial crisis level, and Chinese car shipments surpassed Germany in 2022 due to the rise of Chinese EV brands such as BYD.
Deutsche Welle reports that Germany's once-successful business model (importing cheap energy and cheap pre-products, mainly from Russia, processing them into high-quality goods and then exporting) is no longer working. The multiple crises of recent years (the pandemic, the ** chain problem, the Russia-Ukraine conflict and its effects) have inexorably exposed the disadvantages of the German economy. Energy-intensive companies are facing high energy costs, and companies that have moved production overseas will not return. But that's not all, as German small and medium-sized companies, often referred to as the "backbone of the German economy," are at greater risk, according to a study by the German Cooperative Bank (DZ Bank).
Many economists say that what Germany needs most at the moment is economic reform.
Germany needs a fundamental economic transformation. "The biggest challenge for Germany is not the next two years, but the next 10 years, and the need to reinvent its industry," said Vlatzcher, director of the German Institute for Economic Research in Berlin. ”
Germany** has taken tentative steps in this direction, such as incentivizing investment, increasing financing for start-ups, speeding up the approval of infrastructure projects, and easing immigration rules for skilled workers to help address labour shortages.
However, the internal political climate in Germany is not conducive to change. Tensions within the triad are hampering policymaking, exacerbating uncertainty for businesses and giving Germans a sense that the incumbent is powerless to solve the problem.