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Is Germany’s economic model doomed? | DW Business Beyond
- BASF, a chemical company, is cutting jobs in Germany and investing in China.
- Germany's economic growth has decreased, with rising pessimism among companies.
- German economic strengths are under scrutiny as global economic changes challenge their model.
- Germany's economic troubles could affect the EU due to close trade relationships.
Germany’s Economic Success Story (00:02:19)
- Germany went from being economically struggling post-reunification to a leading exporter.
- Labor market reforms, such as creating lower-wage jobs, made German labor cheaper and boosted competitiveness.
- Global demand for manufacturing goods increased due to emerging markets and the opening of new economies.
- "Made in Germany" became a mark of quality, particularly in technology-driven products.
- China's rise as a market economy significantly benefited German exports.
Problem 1: Dwindling Demand (00:05:16)
- Global economic instability and recession threats have reduced demand for German products.
- Exports to China, a major market for Germany, have declined, impacting German companies across various sectors.
- Germany's economy is suffering due to lower global demand for both consumer and capital goods.
- Energy crises have compounded problems; the Ludwigshafen BASF plant faced massive energy bills and cut jobs while continuing expansion in China.
- Energy price surges and uncertainties have led some businesses to consider relocating outside Germany.
- Lower productivity in Germany is partly due to fewer hours worked, leading to deindustrialization.
Problem 3: Consumption (00:10:26)
- Domestic consumption is too low; stagnant wages and reliance on exports exacerbate the problem.
- Wage expectations in Germany have hit their lowest point since 1991.
- High inflation and energy costs further suppress consumer spending in Germany.
Problem 4: Investment and Digitalization (00:11:43)
- Germany's export sector remains critical, but reliance on traditional goods over digital products poses risks.
- The German tech sector struggles, with a notable exception being SAP.
- Germany invests less in its economy compared to European neighbors, impacting digital infrastructure and innovation.
- A cultural aversion to public debt and a frugal government approach means underinvestment in future technologies like IT.
- Marianne Janik, CEO of Microsoft Germany, criticizes the country's fiscal conservatism.
- Digital expertise is lacking among German small and medium businesses, with 40% unable to find digitally skilled employees.
- Retraining initiatives are growing but must address a significant digital skills gap.
- Plans to improve include doubling AI funding and new research labs, but foundational digital advancements are needed first.
Problem 5: Innovation (00:16:06)
- Germany's position in innovation is mediocre, ranking 10th globally despite a high patent registration rate.
- Bureaucracy hampers business creation, with new company startups and construction permits facing delays.
- Examples like Marvel Fusion show difficulty obtaining large funding in Germany, pushing companies abroad.
- The country has talent and an industrial ecosystem but lacks the funding to commercialize innovations domestically.
- Germany faces both short-term and structural economic challenges.
- Past economic successes due to trade, energy, and industry have created complacency.
- A new economic model is needed, with a focus on future investment, improved conditions for growth, and adaptations to change.
- Energy supply improvements and removing barriers for renewables are positive steps.
- Maintaining export power while exploring new trade agreements offers a balanced approach.
- Germany's future relies on addressing current slumps while being proactive for when global economic conditions improve.
- Reflective external perspectives are vital for the German economy to consider what it wants to represent.