The German economy is simply not gaining momentum at the moment. Bundesbank President Nagel therefore sees no reason to paint a pessimism.
Bundesbank President Joachim Nagel considers the weakness of the German economy to be temporary. “Germany is not the sick man of Europe. I think that’s a misdiagnosis that catches many people all too easily. We should be more self-confident,” Nagel told the “Handelsblatt”.
In the winter half-year, the German economy shrank for two quarters in a row and thus slipped into a so-called technical recession. In the second quarter of 2023, the gross domestic product (GDP) in Europe’s largest economy stagnated compared to the previous quarter. High inflation, faltering consumption and a weakening global economy are causing problems for Germany as an export nation.
“Compared to other countries, Germany is doing well overall, not just in terms of employment and debt sustainability,” said Nagel. “We shouldn’t let “Made in Germany” be played down. The German economic model is not obsolete. But it needs an update.” Nagel mentioned the energy transition, digitization and the need to make international trade relations more resilient as keywords.
On the other hand, there is no need for an artificially cheapened industrial flow, as is currently being discussed politically, says Nagel: “Broad subsidies usually don’t help in the long run, but rather contribute to the fact that structural deficits become entrenched and the necessary change is overslept.” It was correct “to cushion the extreme price peaks that we had in the short term,” said Nagel. “If the industry is to adapt quickly, however, price signals should not be fundamentally undermined. Companies must face the challenge of higher prices.”
Source: Stern
