Economic crisis: How Germany is overcoming its weak growth

Economic crisis: How Germany is overcoming its weak growth

Germany’s economy is deep in crisis, as this week showed again. The most important insight is that politicians are easy to complain about, but the path to improvement begins with ourselves

This article is adapted from the business magazine Capital and is available here for ten days. Afterwards it will only be available to read at again. Capital belongs like that star to RTL Germany.

Sometimes the entire turbulent situation of a country is condensed into a single day. Like on Wednesday of this week.

The morning began with the report from the vast forests and fields behind the city limits of Berlin. A majority of 3,499 citizens of the small town of Grünheide decided against expanding the new Tesla factory on the (still) pine-forested community land – only 1,882 citizens voted in favor. A few hours later, the Federal Minister of Economics presented his annual economic report, which was in reality a declaration of bankruptcy. And late in the evening, an agreement finally collapsed between the governing parties and the CDU/CSU on the “Mini Growth Opportunities Act”, which was weeks overdue but has since shrunk considerably.

It was all there that day: disastrous wrong decisions, the big clash between expectations and reality, plus intrigue and intrigue – great drama. Unfortunately not fiction, but reality.

When it comes to the style of political debate between the government and the opposition, but also within the government, my colleague Nico Fried – who is usually not particularly prone to being particularly grim – said everything that needs to be said this week: “This argument for the sake of the argument , the provocation for the sake of the headline, the teasing and postcarding – I find that more grueling about this coalition than any other before.” Read his in “stern” – it doesn’t put you in a good mood, but it makes you feel better afterwards.

Unworthy in style and content

In terms of content, this day was a fiasco. The so-called Growth Opportunities Act, which should henceforth be better called the “Vertane Opportunities Act”, was already far too puny before the 16 state prime ministers in the Federal Council leaned over it and picked out and chopped up every single measure from the package. But now it’s a joke – albeit one with a telling punchline: The Union, which is constantly complaining about the gloomy mood, will stick to its “no” as long as the coalition wants to continue to cut the subsidies for agricultural diesel for farmers. So much for their demand that the coalition should finally make savings, set new priorities and make better use of existing resources.

If we muddle along like this, in six months the 0.2 percent growth that the federal government is now expecting for this year will seem like the 1.3 percent it forecast in October today: almost heavenly. If things go reasonably well, then Germany will face a long phase of stagnation in which large parts of the population will somehow get by with their jobs, but will lose significantly in prosperity compared to people in other industrialized nations. Anyone who finds this uninspiring should be told: things can get even worse.

Three inconvenient truths

There are three answers to the compelling question at this point of what should be done about this malaise – which are uncomfortable for everyone involved.

The first leads again to Grünheide, the small town east of Berlin on whose western flank, squeezed between railway lines and the highway, Elon Musk built the first parts of his Tesla car factory out of the sandy ground three years ago. As a local resident, you certainly don’t have to like the fact that this tranquil forest peace is suddenly becoming a new Wolfsburg. But if 3,499 local residents can now decide what will become of a project that will determine one of Germany’s most important industrial sectors and hundreds of thousands of jobs at supplier companies across the country, then we will not need any money or effort in the Mini-Growth Opportunities Act or anything in the coming weeks to put in place a different growth package for the economy.

After all, Grünheide’s vote is not binding. But it’s not just the oft-maligned politicians who have to decide what they want to do with this country. Rather, we all have to answer the question of how much new things and how much technical progress we still want to allow in this country.

The second answer leads to the traffic light coalition, which is currently seeking balance in a balance of terror. After two or three weeks, everyone involved ostensibly agrees that the country and the companies urgently need a boost: relief from taxes and bureaucracy, as well as finally planning security and more investments. But instead of now seeking an agreement, those involved insist on trifles such as coalition options in two years and taunts about who thought or said what first and when, or did not coordinate with anyone beforehand.

Much more is embarrassing than just the economic situation

Yes, the economic situation may be “embarrassing” for the FDP finance minister, as he himself put it one day. But since the misery was to a large extent and within just one year caused by mismanagement of this coalition, it is this government that is embarrassing – and that includes this finance minister.

In view of the difficult economic situation and the threat from Russia, Germany would have to mobilize 30, or even better, 50 billion euros starting this year (and then permanently every year) in order to, on the one hand, relieve the burden on companies and stimulate investments, and on the other hand, further strengthen the Bundeswehr. This corresponds to eight to twelve percent of today’s federal budget. You can criticize the Federal Minister of Economics for a lot of things, but he is the only one who has so far outlined a concrete financing proposal for this. Everyone else, primarily the Chancellor and the Finance Minister, hide in an in-between world of the subjunctive irrealis: One should, one could, one would have.

Two years after the start of the war in Ukraine, two years after Olaf Scholz’s famous turning point, that is far too little. If Scholz and Christian Lindner have ideas on how they can launch such a package without new debt, bring it on! Otherwise they are simply not up to their tasks.

And then, thirdly, there is an opposition for whom small tactical advantages are currently more important than progress in the matter they otherwise complain about. You can lead an opposition, as Friedrich Merz is currently doing, and you can also wear down a government, which is your right as opposition leader. But that doesn’t make him a better head of government. There are still a good twelve months until the actual federal election campaign begins – twelve months that are far too long to just carry on like this.

Source: Stern

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