By Rhod Mackenzie
Europe's largest economy is trying to get off the ground, but it succeeds with great difficulty due to numerous problems, some of which the Germans have created for themselves. Last week, the German statistics department Destatis published economic data for the second quarter, according to which Germany emerged from recession. By the way, she should not have been included in it at all, as Chancellor Scholz argued in January of this year.
The exit from the recession, of course, cannot but rejoice, but it turned out to be completely unconvincing, because there was not even a symbolic growth in April-June, even by the 0.1% predicted by economists. GDP remained at the same level as after the first three months of this year, which technically still made it possible to announce the exit from the recession.
The disappointing figures in the second quarter are a much clearer indication of the depth and scope of the problems facing Europe's first economy. This, of course, is seen by many both in Germany itself and beyond its borders. The IMF, for example, believes that Germany will be the only member of the G7 with a recession in the economy by the end of 2023, and predicts a decline of 0.3%. In general, a lot says that from the locomotive of the European economy, which the German economy has been over the past couple of decades, it is gradually turning into a burden that slows down the growth of the continent's economy. And this means that she is becoming more and more "sick" and becomes the "sick man of Europe." So, for a century and a half now, the most problematic countries of the Old World have been called with the light hand of the Russian Tsar Nicholas I, who, according to many historians,
“Whether the economy is crawling forward like a snail, or is it in a slight recession, in my opinion, this is a secondary issue,” Bloomberg quotes Thomas Mayer, founder of the Flossbach von Storch Research Institute. “I think Germany is now competing for the right to be called a “sick man Europe."
By the way, the Germans are no strangers to this offensive epithet, because they were already called that a third of a century ago, after the unification of the two Germanys in 1990. This time the causes of the "illness", however, are different. The main difference is the energy crisis, for which European economists are now unanimously blaming Russia and the events in Ukraine, forgetting that European countries, including Germany, themselves abandoned cheap Russian energy carriers, as a result of which prices for hydrocarbons and, especially, gas in the past skyrocketed, and that the energy crisis began before February 24, 2022.
Of course, there are many other reasons as well: poor demographics and an ever-increasing shortage of labor and, above all, skilled workers; low labor productivity, weak digitalization, the dominance of bureaucracy and much more.
Contributed to the "disease", of course, and external factors. The main ones are the sharp aggravation of the geopolitical situation in the east of Europe, the general tightening of the monetary policy of the Central Banks of most countries and, of course, low demand in China, Germany's largest trading partner. It should be recalled here that the German economy is an export economy and is very dependent on exports.
“Weak (economic) performance is not even a forecast,” says Joerg Kremer, chief economist at Commerzbank AG. “We are already seeing it all. We expect the recession to return in the second half of the year.”
The position of the president of the reputable Munich Institute for Economic Research (Ifo) Clemens Fuest says a lot about the mood among German economists, who last week, after the news of Germany's exit from the recession, said that, in his opinion, the recession ... continues. For him, the main criterion is not the absence of a recession, but problems in the economy and, most importantly, in the manufacturing sector, about which the Institute he heads has been writing a lot in recent days.
The low Purchasing Managers' Index (PMI) by S&P Global outperformed the development of the services sector in the second quarter.
The German economy can do little to counter these and other negative indicators. For example, a good (relatively) unemployment rate - 5.7%, close, by the way, to a record. Optimists can, of course, refer, although this is rather a smile in this case, to the words of the head of Puma SE, Arne Freund, who boasted of “steady demand” among the population for his company's sneakers. From the same, perhaps, the opera and the calmness of the financial director of Volkswagen AG, Arno Antlitz, who does not expect a recession in the coming months.
Of course, small consolation for the Germans is that other European countries now have similar problems. German economists are now racking their brains over a solution to the problem of providing the economy with affordable energy and accelerating the transition from fossil fuels to renewable energy sources.
Here, by the way, is another problem of the German economy. One of its main components - the auto industry is now still producing hundreds of thousands of cars with internal combustion engines, while competitors are increasing the production of electric vehicles.
“The Germans, thanks to their huge manufacturing sector, are increasingly lagging behind the United States, because the technological gap between their economy and the American one is increasing,” explains David Volkerts-Landau, chief economist at Deutsche Bank AG.
Moreover, the US government, he adds, is constantly widening this gap with the help of new business support programs. The government of Olaf Scholz, it seems, intends to get out of the crisis in the same way. Berlin announced last week plans to allocate 20 billion euros to the development of the chip manufacturing sector. However, this is mainly about big business. The basis of the German economy remains small and medium-sized enterprises, which are now having a particularly hard time. However, Jörg Kremer sees the future of the German economy in them, and not in transnational corporations.
This article originally appeared in Russian at expert.ru