Reference News Network, January 13 report: According to the UK's Daily Telegraph website on January 10, "the Sick Man of Europe" is now in critical condition. Since the Russia-Ukraine war began in 2022, Germany's economy has almost come to a standstill.
After four years, although Germany has partially reduced its reliance on Russian oil and gas, unemployment is approaching 3 million people. The trade war initiated by US President Trump has severely impacted German manufacturing, causing heavy losses in core industries such as automobile manufacturing. In addition, this largest European economy is also facing an identity crisis.
German Chancellor Scholz recently outlined the recent challenges facing Germany in a letter to his ruling coalition partners in the Bundestag. He warned that many industries are at a critical juncture between survival and collapse.
He said, "Some industries in Germany are in a dire situation. Whether it is industrial giants or a large number of small and medium-sized enterprises, they are facing serious challenges, with many companies experiencing mass layoffs."
Former UK Business Secretary Greg Clark once pointed out in 2017 that a production task that takes Britons five days to complete can be done by Germans in four days. This comment was meant to mock Britain's low productivity.
But Scholz warned last week that Germany's productivity growth "is no longer impressive."
He attributed the stagnation of economic growth to "changes in the global economic environment," rising labor costs, and bureaucracy.
Recent data show that Germany's economy will continue to be sluggish for the foreseeable future.
Although Berlin has significantly increased defense and infrastructure spending, which is widely welcomed, the German central bank has lowered its growth expectations for 2026 to only 0.6%; the Munich Institute of Economic Research forecasts a growth rate of only 0.8%.
Some people are optimistic, with signs indicating that Germany's 50 billion euro economic stimulus plan has started to take effect.
Head economist of Berenberg Bank, Holger Schmieding, pointed out that although exports remain weak, domestic orders have begun to recover.
The bank expects Germany's economy to grow by only 0.7% this year, with government spending contributing more than half of the increase.
According to Schmieding, by 2027, as the stimulus policies fully take effect, consumer and business spending begin to grow, and the economic growth rate is expected to rise to 1.3%.
He added that Germany has decided to amend its constitution, allowing the federal government to raise funds through borrowing when defense spending exceeds 1% of GDP, without being restricted by debt limits. However, this policy will not become a winning formula for economic growth, as some people believe.
He said, "The backlog of orders for some companies continues to rise, and they will find it difficult to handle all the new tank and drone orders, and unable to complete a large number of railway upgrade projects."
Germany faces another problem. Its working-age population is rapidly aging.
The International Monetary Fund recently warned that over the next five years, the decline in Germany's working-age population will far exceed that of other G7 countries; by 2036, nearly 30% of the current workforce will reach retirement age.
This will not only pose a challenge to fiscal balance but also exacerbate the shortage of skilled workers.
Economist Peter Bofinger from the German Economic Experts' Committee believes that in addition to strengthening vocational training, policymakers need to pay more attention to one issue: over-subsidizing traditional industries while neglecting support for emerging industries.
He said, "Our problem is that we do not have a vibrant digital industry or a strong financial services sector like the UK. Therefore, the country's prosperity largely depends on manufacturing. Now, Chinese manufacturing is posing a challenge to us because China can produce similar products at lower costs."
He is worried that lawmakers may focus too much on energy subsidies and neglect innovation investments. (Translated by Wang Dongdong)
Volkswagen warehouse in Wolfsburg, Germany (AFP)
Original: toutiao.com/article/7594781410779529769/
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