L’German economy in disarray. L’Eurozone in chaos. Difficult words from the ECB President Christine Lagarde, delivered during the hearing in the European Parliament. A succinct statement that essentially confirmed the need to continue monetary tightening “for a sufficiently long period of time to make a significant contribution to the timely return of inflation to our target.”
The impact on the fires is fire-hazardous European stock exchanges: Up to start the week, after an eighth of declines, still held in check by worries about the prospect of higher interest rates lasting longer than expected. As if that wasn’t enough, the Evergrande collapse in Hong Kong, endangering the future of China’s real estate market. The company said it cannot issue new bonds due to an ongoing investigation into one of its subsidiaries, Hengda Real Estate Group.
The German economy in crisis: The three main causes
Beyond the adverse fate experienced here and there in the states of the Union, it is the fall from the altar into the dust of Berlin that is shaking the already precarious European equilibrium. A setback for the German miracle that turned Germany from a pariah of post-war Europe into the locomotive of the continent. Today, the same country that faced the sins of Nazism, Reconstruction, reunification and all contemporary crises is exhibiting the worst performance among developed economies.
But how was it possible that Europe’s most important manufacturing power stopped growing overnight? The causes and contributory causes lie further east, in Pandora’s box War in Ukraine has revealed: For a nation with a powerful industrial engine, the loss of a resource like that natural gas Low-cost airline from Russia was fatal. But also the China’s slowdown Germany’s fate is no stranger: the sharp downturn in Beijing’s economy after years of unbridled growth has hurt German growth. L’let’s wait and see The current government has done the rest: just enough to expose the specter of Deindustrialization, with major brands and their employees willing to move where the money demands. The European Central Bank’s interest rate hike is also putting a significant strain on credit-dependent projects.
The structural deficiencies of the German economy
The shocks of the last two years have highlighted some of the system’s key structural deficiencies, such as the low rate of digitalization of governance processes and the economy, and the lack of preparation for a near future that will become increasingly independent of fossil fuels. In fact, the main story is wedged green transition: So much so that one of the most discussed solutions – proposed by Robert Habek’s Greens – is precisely to set a cap on industrial electricity prices to ensure that the German economy can easily cope with the energy transition. A proposal that met with resistance Olaf Scholz.
“German industry is late in its transformation,” claims the authoritative economist Marcel Stratzscher in the columns of Il sole 24 ore: The origins of this catastrophe actually lie largely in Dependence on Beijing and Moscow It’s in the Delaying green transformation. So a model that should be ignored? No, it would be like throwing away the clothes with all the dirty water. The German model works and remains excellent, but it is the aging of its industrial system that could cause damage: above all the automotive sector, which, after 15 years of unchallenged dominance, arrived late in the electric race and bet everything on China. The time would therefore have come, as in the best Keynesian recipes Spend money to deal with the crisis: The German state must invest in education, technology, innovation and infrastructure. Above all, to respond to long-term deficiencies such as the aging of the population, the lack of skilled labor, as well as excessive bureaucratization that has led to an elephantine system that hinders the creation of companies and projects.
Two crises in comparison
It is certainly not the first time that the German economy has reached its limits and the accidents of history. In these hours there are many comparisons with another complex moment for Berlin’s surrender, namely the Late nineties. On the threshold of the new millennium, the German system appeared to be stagnating, weighed down by high labor costs that were blocking the competitiveness of a newly restored country. The Labor reforms Presented by Gerhard Schoröder In the two-year period 2003–2004, together with the Agenda 2010 projects, they aimed to reposition Germany in the global market. A series of unpopular reforms – including cuts in social benefits and allowances – in line with the liberalization approach of the Lisbon Strategy.
A series of labor market interventions followed between 2003 and 2005 – the “Hartz Plan”, in which the final phase, the so-called “Hartz IV”, came into force. Changes that have upended the way Germany’s unemployment benefits and centers work, as well as the nature of the labor market. In May 2007, German unemployment reached its lowest level in five and a half years, with ups and downs. A much-discussed reform, especially due to the long-term social consequences, such as the increase in… Social inequality in the country. A growing suffering that is signaled by two fundamental indicators: the trend towards a falling wage share of national income and the progressive increase in the number of Germans living below the poverty line.