German Economy

A Cloud with a Black Lining

Factory closure
Factory closures are a worrying indicator.
  • Why it matters

    Why it matters

    If leaders don’t build long-term trust with businesses in Germany, the country’s competitive edge might erode among insecurity on energy prices and the political future of the E.U., argues the author.

  • Facts


    • The oil price is currently near historic lows, but no one knows if it will stay down beyond next year.
    • In 2011, the German government passed a law to enforce the so-called Energiewende, a shift to renewable energy.
    • Germany has a competitive edge because of its reasonable energy concepts, its innovativeness and its openness to new technology, according to the author.
  • Audio


  • Pdf

At a first glance, German industry has little reason for complaint.

The oil price is as low as it has been in years, and the rise in electricity costs through the Renewable Energy Law seems to have been averted for the moment.

Domestic demand has been increasing, and German exports are benefiting from the weak euro.

Despite the sovereign-debt crisis in Europe, Germany has for its part announced it will balance its budget. The nation’s unemployment figures are lower than in any other major European economy.

It’s true: Several factors that a year ago were causing deeply furrowed brows have developed more favorably than was originally feared. But upon closer scrutiny, Germany is probably experiencing a short respite. No reason exists to give the all-clear — unfortunately.

The sum of the individual bright spots isn’t sufficient for announcing a reversal of the trend toward Germany’s creeping de-industrialization. Massive setbacks continue to be realistic mid-term scenarios on all fronts.

No one knows how long the OPEC countries will continue to let the supply-driven price of oil cost them hundreds of billions of dollars in order to defy other producers of oil and gas. Security in planning for electricity costs extends only to the coming year. Still lacking is a sustainable concept for financing the energy transition — and current discussions about emissions trading and the energy market’s design  give reasons to fear expensive outcomes.

The effect on the European Union’s economy of a possible Greek repudiation of agreements to overcome the nation’s debt crisis is just as difficult to predict as the future course of conflicts in Ukraine and the Middle East. 

Unfortunately, the current picture shows that despite positive news in Germany, the country's underlying trust hasn’t recovered from grievous jolts suffered in recent years.

Uncertainty prevails and is causing companies to postpone plans for investments in Germany even further. In important industrial sectors, new investments have been lower than write-offs for a long time. Many companies, especially energy-intensive ones, are basically living off their past achievements.

De-industrialization is not an empty menace from lobbyists’ chamber of horrors but a bitter reality eating away at the German economy’s foundations.

It’s supposed to be part of entrepreneurs’ self-definition and recipe for success that the business leaders also take risks with their investment capital. But what distinguishes them from gamblers is risks must be calculable and counterbalanced by corresponding chances for growth.

Additional requirements are an unshaken faith in free enterprise and governmental common sense. If these prerequisites are in order, then industry can sometimes shake off a few setbacks in succession.

Unfortunately, the current picture shows that despite positive news in Germany, the country’s underlying trust hasn’t recovered from grievous jolts suffered in recent years. Without this trust, investments won’t be made. The political and economic establishments must work together to change the situation.

The crisis hasn’t been resolved yet, and no momentary pause can cover up this glaring fact. On the contrary, an acute urgency exists for the tasks at hand. Today, the global conditions for industry can change with breathtaking speed. So it continues to be imperative to work with unity and decisiveness to shape those developments we can influence in Germany.

They include core competencies to which the German economy has long been able to point with pride such as: politically, economically and ecologically reasonable energy concepts; promotion of innovation; receptivity to new technology; and the strengthening of free trans-Atlantic trade through the current negotiations with the United States. Through pioneering initiatives in these areas, we can built up the desperately needed, long-term trust.

Those who think only up to the next election or consider only the current balance sheet have difficulty engendering long-term trust, and such people are inclined to patchwork solutions. The economic and political establishments have shown in the past they are capable of something better. That’s also what must be achieved in the future.


To contract the author:

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!