World Trade

The German economy, which is the engine of Europe, is sputtering.

Frankfurt (Reuters) – Germany has been one of the world’s economic stars for a long time, but it is on the verge of a turn of events that could hurt the prosperity that its post-war generation built.

On the surface, Germany’s economy seems to be doing well. However, recent changes in exports and big drops in stock prices show that Germany, which has the most people and is the most productive country on the continent and is a key part of the European Union, is having serious problems.

In May, Europe’s biggest economy imported more than it exported for the first time in 30 years. This ended Germany’s run as “Exportweltmeister” or “global export champion” since the country was reunified.

Finance Minister Christian Lindner compared it to a “profit warning,” which is a red alert that companies send out when they think earnings are going to be lower than expected. Germany’s rise to the top of the world economy has been based on selling more than it buys. (A picture of this can be found at

Just a few weeks ago, on the same day that Berlin was getting close to rationing energy, shares of Deutsche Bank (ETR: DBKGn) and Commerzbank (ETR: CBKG), the country’s two biggest banks and economic barometers, fell by about 12 percent.

One person with knowledge of the situation said that German regulators blamed the collapse on fears for the country’s economy because of cuts to the supply of Russian gas, which is important to industry.

Achim Truger, one of the government’s top economic advisers to the chancellery, said, “This could be the start of a weaker time for Germany.”

“If Germany was ever looked up to as a model, it might be time to be honest about its strengths and weaknesses.” No one is flawless. “

With help from the United States, Germany built its economy on cars, machinery, and chemicals after World War II. This was done through a system called Deutschland AG, or Germany Inc., in which banks like Deutsche Bank owned shares in industrial firms.

The country’s Bundesbank kept its currency stable, cheap Russian gas powered industry, and unions were tied into management boards to control wages. As a result, it has become a symbol of industrialism that people all over the world admire grudgingly.

All of this made exports go up in the 1980s, 1990s, and 2000s, when the Deutsche mark was replaced by the euro at a rate that made German exports look good.

Thanks to changes in the labour market, Germany stopped being called the “sick man of Europe” around the turn of the century. However, the fact that it sold more to its European neighbours than it bought made many of the countries that had to borrow money to buy German goods angry.

Then, when there was a debt crisis, Berlin’s insistence that countries like Greece accept tough terms for emergency loans made people even more angry. But many Germans didn’t agree, saying that the country’s success was due to how hard they worked.

German Chancellor Olaf Scholz met with trade union and employer association leaders this week to talk about what he called a “historic” cost of living crisis. He wanted to bring back the spirit of cooperation that led to this success.

Scholz, who is a Social Democrat, said that he was bringing back a model of cooperation that had been set up in 1967, when Germany went into recession for the first time since the end of World War II.

But it will be harder to make trade unions happy now because of a national effort to keep wages low through tax-free “mini-jobs” that capped hourly earnings for many low-skilled workers at about 10 euros, which is just enough to buy 20 McDonald’s (NYSE:MCD) chicken McNuggets.

Then-Chancellor Gerhard Schroeder, who was close to Russian president Vladimir Putin and later worked for a Russian oil company, put in place reforms to cut back on unemployment benefits. This made things worse with unions.

Even though Germany seems more stable than Britain, where the government is changing, or France, where people wore yellow vests to protest the rising cost of living, tensions are rising.

Strikes are a sign that workers are getting more and more unhappy. In 2015, there were about 28 strike days per 1,000 workers, compared to almost none in 2000, and unions have recently warned of more strikes to push for wage increases.

“I saw this risk when a gas embargo was being talked about,” said Monika Schnitzer, another government economic adviser. “Stability would be a big worry for me.”


Economists now think that Germany could be at the start of a bad time.

Even though it did better than the rest of the euro area during the pandemic in 2020, its economy did not recover as quickly as the rest of the area in 2021, and it is expected to be behind this year as well.

The European Commission thinks that Germany will grow by 1.6% this year, while France will grow by 3.1% and Spain will grow by 4%.

Carsten Brzeski, an economist at the Dutch bank ING, said, “Globalization, just-in-time supply chains, and cheap energy from Russia are all things that are changing, and they are changing for the better.”

These advantages have helped giant German companies and hundreds of small and medium-sized ones do so well.

He said, “This is a big turning point for Germany.”

The important engineering and machinery industry in Germany, which supplies factories in China and around the world, is on edge.

Ralph Wiechers, a member of the executive board of the trade group VDMA, said that the trade balance going into the red was a “warning.”

“Now the question is how much customers around the world will cut back on projects,” he said.

Fielmann, a German company that makes glasses and sells them in 16 countries, is not optimistic. Its stock has lost a third of its value this year.

“We are feeling the pressure in the supply chains and the significant rise in transportation and energy costs,” said its CEO, Marc Fielmann.

Gunther Schnabl, an economist at Leipzig University, says that the situation in Germany is due to the fact that people there are cheap.

He said that for years, Germany has saved money on defence and infrastructure while keeping wages low and buying cheap gas from Russia to help exporters.

“But it wasn’t putting money into something. Instead, it was using it to hide the fact that prosperity was getting worse. This won’t keep working for long. Disagreements and differences are getting worse.”

(John O’Donnell wrote this, and Tomasz Janowski did the editing.)

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