Germany Emerging as the Sick Man of Europe, With Growth Projected at a Tenth of a Percentage Point This Year

BERLIN — The global economy may be on solid footing, according to the latest numbers from the OECD, an economic policy forum. The data, though, also reflect a broader, deep-set malaise in the heart of Europe — Germany.America leads the OECD’s projection of member country economies, with 2.6 percent growth anticipated for 2024, while the Euro area as a whole is likely to enjoy a more modest 0.7 percent. Real GDP projected growth rates for the world as a whole are 3.2 percent for both 2024 and 2025, thanks in part to improving consumer confidence worldwide.Even the Russian economy, despite being under one of the world’s most constrictive international sanction regimes following the full-scale invasion of Ukraine in 2022, is projected to grow by 3.7 percent this year.In the Teutonic capital at Berlin, though, eyes are on the OECD’s much more modest projections for their own country.The OECD’s mandarins say Germany will grow a piddling 0.1 percent this year, and a = modest 1 percent for 2025, a startling prediction for the world’s no. 4 economy and the largest in Europe.Germany, it seems, is being left behind. Of the 100 largest companies worldwide, just two are German: a software company, SAP, and a technology conglomerate, Siemens. The label “Made in Germany” was used to denote the Prussian virtues of reliability and sense of order — revamped for the auto era into engineering precision, mechanical superiority, and quality on four wheels.Once the master of the internal combustion engine, Germany is still struggling with higher energy costs caused by the weaning industry away from Russian energy, which a shutdown of nuclear power plants has exacerbated.High demand abroad for automobiles and other manufactured products, particularly from China’s growing middle class, drove Germany’s economic prowess over the last 25 years. That chapter appears to be coming to an end, though. As a result, Germany is rapidly losing ground to Communist China in, say, the race to electrify the world’s vehicles.Volkswagen is said to be mulling laying off 30,000 employees in Germany, a previously unheard-of cost-cutting measure ending a 30-year-old job protection agreement that would have stopped any domestic layoffs until 2029.Cognizant of the risk posed to some of Europe’s oldest and largest national champions by cheap Chinese electric vehicles, the bloc is shoring up its economic defenses.European Union member states voted Friday on raising tariffs on Chinese electric vehicles to 45 percent from the current 10 percent, an effort to protect the European auto industry from a flood of Chinese state-subsidized cars.Concerns over a brewing trade war between the European Union and China are felt acutely in Germany, so much so that a large industrial umbrella association, the Federation of German Industries, cautioned against sparking a conflict.Lawmakers’ decision to impose import tariffs on Chinese electric cars “must under no circumstances mean the end of the talks” between China and Europe, the Federation of German Industries said in a statement after the vote.Although the federation supports protecting the Eurozone from “state market distortions” — a veiled criticism leveled at China’s gargantuan state subsidies — “stable economic relations with China must also be given balanced consideration.”Europe’s executive branch, the European Commission, must now decide if the auto import duties will come into force next month, though it left some wiggle room for compromise.The commission is also exploring a potential “alternative solution” that would be “WTO-compatible, adequate in addressing the injurious subsidization established by the Commission’s investigation [of China’s predatory business practices], monitorable and enforceable.”The view from Germany is not only one of dire economic forecasts. At home, confidence in Germany’s leadership ability is exhausted among the German electorate.The center-left Social Democrats received a drubbing in state elections in Thuringia and Saxony and squeaked to a narrow victory in Brandenburg in what was widely seen as a repudiation of the chancellor’s party and leadership.Both Germany’s hard-left party, the Sahra Wagenknect Alliance, and hard-right party, the Alternative for Germany, enjoyed their best showings ever at the federal level.The latest opinion polling numbers reflect the results at the ballot box but also show deep disapproval of Chancellor Scholz’s ruling coalition. Voters’ intense dissatisfaction with the chancellor himself is near its peak.Although German foreign policy traditionally hews closely to allies, eschewing unilateral decision-making in favor of consensus, Berlin has avoided moving in lock-step with allies regarding Ukraine.Herr Scholz has dithered on Ukraine aid, notably refusing to supply Ukraine with Germany’s Taurus long-range missiles, claiming deliveries would make Germany more directly a party to the conflict and be perceived as escalatory by Russia.Yet the refusal puts Berlin out of step with America, France, and Britain, who have already supplied similar weaponry to Ukraine in significant quantities.Like voters in Germany, the opinion of Berlin from the Kremlin — and especially the opinion of Herr Scholz’s political capital — is also decidedly pessimistic. The Russian state-owned news agency, Tass, said that Vladimir Putin, the Russian president, “does not have any common topics to discuss” with Herr Scholz.“There are practically no common themes for discussion lying on the surface as bilateral contacts have virtually stopped, not even on our initiative,” the Russian leader’s press secretary said.Germany rang in reunification celebrations on Thursday, marking the dissolution of the communist puppet German Democratic Republic in 1990 and the reunification of East and West for the first time since 1945. Hope for the German future then was cautiously optimistic but buoyed by confidence in a strong Deutschmark and the former West Germany’s solid economic footing.Now, 34 years since that watershed moment in history, the German star shines a bit less brightly than it used to.

Germany Emerging as the Sick Man of Europe, With Growth Projected at a Tenth of a Percentage Point This Year

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