German economy in crisis – the EU too?
With minimal growth of just 0.1 percent in the third quarter of 2024, the German economy has only narrowly avoided a recession. The ECB's new Financial Stability Review predicts a fragile environment for Europe as a whole, marked by geopolitical uncertainty and tensions in global trade. Europe's press sounds the alarm.
Exposed to the chilly winds of globalisation
The Economist comments:
“It is a familiar litany. German industry, especially its small and medium-sized Mittelstand firms, has focused on incremental innovation, leaving it unprepared for technological shocks like the advent of electric vehicles. Cosy links between business, banks and politicians bred complacency and resistance to reform. Dogmatic adherence to fiscal rules led to rusting bridges, decaying schools and delayed trains. Growth in foreign markets fattened Deutschland ag's profits (and treasury revenues) for a while, but that export-led model left Germany exposed when the winds of globalisation turned chill.”
The Trump factor
Naftemporiki looks for causes across the Atlantic:
“It is no coincidence that the current German governmental crisis erupted on the same day Trump's victory in the US elections became clear. Trump's economic programme envisages imposing tariffs on a range of European products to promote the growth of the US economy. Tariffs are to be levied on products the US can manufacture in its own country. Experts estimate that the Eurozone's GDP will shrink by one percent if tariffs are introduced. Trump has confronted Europe with a series of parallel challenges, but they all have the same goal: to at least double economic growth in the US. And he is forcing European states to spend more money on defence.”
No one can replace Europe's sponsor
Newsweek Polska is concerned:
“The problem is that a weak Germany also means a weak European Union. This creates two major problems for the bloc as a whole. Almost two-thirds of all German imports come from other EU countries, and Germany accounts for a quarter of the EU's GDP. If things go badly in Germany, the continent faces a decade of stagnation. But that's not all. Elon Musk recently let out a big 'wow' when he learnt how much Germany pays for Europe. It is the sponsor of the entire European project. No one can replace the Germans in this role.”