Germany was first described as the “sick man of Europe” by the The Economist magazine in 1999, when the country was struggling with economic problems after reunification. However, Chancellor Gerhard Schröder’s timely labour market reforms ultimately bore fruit, with economists lauding Germany’s transformation into an “economic superstar” by 2014.
A decade later, the unflattering moniker has resurfaced. In 2023, Germany was the sole G7 nation to face an economic contraction, and IMF projections suggest it will remain the group’s laggard in 2024. An increasing chorus of voices argues that Germany’s once-vaunted economic model is now irretrievably shattered.
According to Igor Steinle, political editor of the Südwest Presse, Germany’s current economic crisis has a face – Volkswagen. The automaker, once a national icon, is struggling to keep pace with Chinese and American competitors in the electric vehicle market. For the first time in 30 years, Volkswagen has announced mass layoffs and may even close German plants, an unprecedented move in the brand’s history. The resulting domino effect through the supply chain could push bankruptcies up by 20%. Steinle highlights a study by the Federation of German Industries (BDI), which warns that Germany is facing its most significant transformation since the post-war era, comparable to the Marshall Plan, as it simultaneously tackles structural change and climate targets. The BDI estimates that €1.4 trillion in investment is needed to modernize infrastructure, education, and buildings, with the state expected to contribute €460 billion.
Writing in the German English-language magazine The European, Rainer Zitelmann contends that the origins of Germany’s current economic malaise lie in the Merkel era’s lack of reforms and the “transformation of its energy sector into a planned economy”. The costly “energy transition,” projected to cost €1.2 trillion by 2035, has made production too expensive for many companies. The EU’s ban on combustion engine cars from 2035 further threatens Germany’s automotive prowess. Zitelmann argues that Germany’s woes are exacerbated by a perfect storm of mismanaged immigration and brain drain.
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Germany’s economic struggles are poised to have repercussions across Europe, particularly in countries like the Czech Republic, which is heavily reliant on its neighbor, with 9% of its GDP and 30% of its exports tied to Germany. However, writing in Hospodářské noviny, Pavel Sobíšek rejects excessive pessimism. He argues that Germany’s current challenges are part of a natural economic cycle, noting that the nation outperformed the eurozone until 2017 but has since been struggling. Sobíšek believes that the contagion from Germany is not a cause for panic and that standing by the nation during this difficult period may be worthwhile, as it could potentially regain its economic prowess in the near future.
Gyula Szabó, a journalist at Index, which has close ties to Prime minister Viktor Orbán’s government, offers a less conciliatory assessment of the situation from Hungary, another country heavily reliant on the German automotive industry. Szabó argues that since the 2011 debt crisis, Europe’s economic model has been built on the German foundation, and if this foundation crumbles, it suggests that Europe lacks a viable economic plan. He dismisses Viktor Orbán’s call for “economic neutrality” in finance, investment, markets, technology, and energy as a response to Europe’s waning competitiveness. Szabó contends that this approach will not yield a solution due to Hungary’s deep integration with the European economy. Instead, he implies that the priority should be to urgently address the staggering energy prices and adopt a rational, pragmatic energy policy, alluding to the notion that halting the flow of cheap oil and gas from Russia may not have been a prudent decision.
“We will all have to work harder and longer,” declares Ronald Ižip, editor-in-chief of Slovakia’s Trend magazine, encapsulating the response to Germany’s—and by extension Europe’s—faltering economy. Citing Christian Sewing, Deutsche Bank’s chief, Ižep notes that Germany’s stagnation and eroding investor confidence may necessitate following Greece’s lead in introducing a six-day workweek. OECD data reveal Germans work a mere 26 hours weekly on average, eight hours below the OECD norm. This disparity suggests a potential reversal of the long-standing trend towards reduced working hours. Yet, Central European politicians continue to champion shorter workweeks and earlier retirement, a stance Ižep deems increasingly untenable. As Germany’s economic woes mirror Slovakia’s, Ižip warns that Slovak policymakers will soon face a reckoning: how to navigate sluggish growth and labour shortages in a changing European work landscape.
The end of the Schengen Area?
As if Germany’s economic woes were not enough, Interior minister Nancy Faeser has announced temporary controls at all land borders, ostensibly to curb illegal migration and bolster internal security. This move extends existing checks with Austria, the Czech Republic, Poland, and Switzerland, while also introducing new controls along borders with Luxembourg, Belgium, the Netherlands, and Denmark for at least six months. The decision has sent shockwaves through the European Union, with many fearing for the future of one of its crowning achievements: the Schengen Area. Writing in El País, Gloria Rodríguez-Pina warns that the free movement of people and goods—a cornerstone of European integration—now stands on shaky ground. Germany’s unilateral action has not only irked its neighbours but also alarmed experts who see it as a potential death knell for Schengen.
These concerns resonate in neighbouring Portugal, where Luana Augusto, writing for Sábado, quotes European constitutional law expert Francisco Pereira Coutinho. He argues that such border closures are unlikely to solve the migration issue and may instead turn back the clock on European integration to the 1980s. Moreover, the economic fallout from increased border waiting times could be substantial. Pereira Coutinho argues that the move is more political than practical—a left-wing government flexing its muscles on immigration to outflank the right. As Europe grapples with the twin challenges of economic malaise and migration pressures, the future of borderless travel within the bloc hangs in the balance.
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Publish date : 2024-10-09 22:49:51
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