Economy in a mood of alarm: “Germany is on the losing road”

Leading organizations of the German economy are looking at the economic situation with great concern. Industry President Siegfried Russwurm told the German Press Agency: “Economically, Germany is on the losing road, especially in international comparison.” Employer President Rainer Dulger told the dpa: “If we want to remain one of the leading industrial nations, we have to turn many screws.” Jörg Dittrich, President of the Central Association of German Crafts, told the dpa that there was a great deal of pressure to act in order not to head into a deep crisis.

The German economy is stuck in a slump. The hoped-for spring upswing did not materialize. The gross domestic product (GDP) stagnated in the second quarter compared to the previous quarter, as reported by the Federal Statistical Office on the basis of preliminary figures. According to economists, the prospects for the coming months have also clouded over. The International Monetary Fund expects the German economy to contract by 0.3 percent this year. According to the spring projection presented in April, the Federal Government expects GDP growth of 0.4 percent for this year.

Only in Germany is economic growth declining

“Unfortunately, the economic indicators are all pointing downwards, i.e. completely in the wrong direction,” said Russwurm. According to the current IMF growth outlook, the German economy is the only one of the 22 countries and regions examined in which the gross domestic product is falling in the current year. “That must alarm an industrial and exporting country like Germany.”

Substantial support from the political environment, especially in such a difficult situation, is still scarce, criticized the President of the Federation of German Industries. “It’s not just about money: we’re not making any progress in reducing bureaucracy. We are not making any progress on the subject of speeding up approvals.” There is too little progress to get the energy system of the future and its costs under control.

“I think that politicians are slowly realizing that we are not talking about a flourishing landscape and a new economic miracle, but about a crisis situation in the German economy,” said Russwurm. “If the answer from the federal government is that we are not making any additional money for this in the budget, it must resolve the conflicting goals within the federal government and the parties supporting it and clarify whether and how it is setting the right priorities.”

Businesses suffer from high costs

Russwurm continued: “I’m afraid the suffering is not great enough. It’s an unbelievable shame, because many developments are foreseeable. We could save ourselves a lot of pain but it looks like it’s going to have to get worse to get the jolt it needs and then get better again.”

According to Russwurm, there are concrete decisions that he can only shake his head at. Federal Economics Minister Robert Habeck (Greens) is proposing an industrial electricity price that should represent a bridge for the future, and on the other hand the federal government is canceling peak compensation for electricity prices. This puts a huge strain on energy-intensive companies.

Craft President Dittrich said that most companies are still doing well. “However, the mood is bad – even among those who are doing well economically. The cost increases due to higher material costs, inflation, wage increases and, above all, due to further increases in social security contributions are enormous.” The competitiveness of the companies suffered as a result and their future prospects came under pressure. “The transformation will only be affordable if there are still enough solvent craft businesses.”

Germany too bureaucratic, not digital enough, too slow

According to Dittrich, Germany is too bureaucratic, not digital enough and too slow, for example in the approval and planning processes. “What lies ahead is very challenging. If action is not taken now and countermeasures taken – especially in the construction sector – then there is a risk of economic difficulties for a long time.”

Unfortunately, the traffic light coalition of SPD, Greens and FDP did not contribute to a positive mood in the country in the past six months, said Dittrich. “On the contrary, your partly impractical and hasty political actions have unsettled many, especially in the trades – especially with the Building Energy Act.”

Dulger, as President of the Confederation of German Employers’ Associations, said: “We are in a recession. Inflation is also holding up more stubbornly than expected. We have some of the highest energy costs, we have some of the highest taxes and additional wage costs. We have an ailing infrastructure. These problems are mixed with skills shortages, sluggish digitization and decarbonization. A doctor would speak of multiple diseases.”

The mood in companies is clouding over, the investment climate is not good. “Above all, we are currently not attractive for foreign investments, partly because we are a high-tax country. We are not an attractive location. We need investments in the location. Above all, Germany must become faster and more digital.” Fewer taxes and additional wage costs are also needed.