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

    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

    Audio

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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. 

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