Economic Policy: Germany Breaks its Neck
Olaf Scholz wants to "unleash" the economy with the help of many laws. Robert Habeck wants to reduce or even shut down industrial capacities in order to save energy in the coming winter. While politicians stumble along, German companies are moving their production abroad or selling up - like the heating manufacturer Viessmann recently did. Germany is currently pursuing an economic policy course - in close coordination with the Commission in Brussels - that is leading the country straight into a really deep crisis. All those countries whose economies are closely linked to Germany are being dragged along.
Germany has fallen into recession. The gross domestic product has shrunk by 0.5 and 0.3 percent in the past two quarters. Politicians and the media are frantically explaining that slowed consumer spending is to blame. Added to this would be the high energy prices and the ECB's key interest rate policy. Interest rates would have to rise to curb inflation, but that would also have negative consequences for the economy. And so on and so forth. It is strange that no one is talking about the effects of the economic sanctions.
Scholz wants to "unleash" the economy
At a press conference in Berlin at the end of May, the German Chancellor tried to show confidence: "Incidentally, we are currently unleashing the forces of our economy with many, many laws with which we are speeding up approval procedures and in particular advancing the necessary expansion of renewable energies."[1] The German Chamber of Industry and Commerce sees things differently: companies still rate energy and raw material prices as the biggest business risk. The second risk that is coming strongly to the fore is labour costs. Due to the ongoing shortage of skilled labour, but also due to rising inflation, more than half of the companies name labour costs as a business risk.[2]
This fact is consistently ignored by those in power. At the East German Economic Forum at the beginning of this week, the Minister President of Brandenburg, Dietmar Woidke (SPD), once again called for more foreign workers and said that this would require "a country that really has nothing to do with xenophobia and with racism."[3] Mr Woidke, that is not the issue here! Germany is currently pursuing - in close coordination with the Commission in Brussels - an economic policy course that is leading the country straight into a really deep crisis. All those countries whose economies are closely linked to Germany are being dragged along.
Scholz, Habeck and their troops further ignore the fact that the Federal Republic is a high-tax country, that numerous infrastructures are ailing and that the population is facing a wave of retirements. On the contrary, everything is being done to make the situation even worse.
Habeck wants to cut production
Robert Habeck, as incompetent in economic matters as Chancellor Olaf Scholz, recently said that Germany could be forced to reduce or even shut down industrial capacities if the gas transit agreement between Russia and Ukraine is not extended.[4] It is statements like these that are causing large industrial companies in the automotive, pharmaceutical or chemical sectors to increasingly move their investments abroad, especially to China.
The outlook remains poor. Yesterday, two leading German economic research institutes presented their forecasts for the current year: the German Institute for Economic Research (DIW) expects gross domestic product (GDP) to decline by 0.2 per cent compared to the previous year. The Kiel Institute for the World Economy (IfW) lowered its outlook to minus 0.3 per cent.[5]
The vice-president of the Kiel Institute for the World Economy, Stefan Kooths, currently criticises the red-green economic policy in an interview: "You cannot subsidise economic growth. On the contrary, high subsidies will further weaken growth!"[6] Kooths therefore sees the German economy in crisis for a long time to come. Instead of strengthening Germany as a business location by easing the tax burden and reducing energy costs, vast sums of tax money are being diverted into subsidies. This is intended to force an energy and thus also a technology turnaround. This spring, however, the sale of the large traditional heating manufacturer Viessmann to American investors was a striking example of the fact that the "red-green economic miracle" is probably on shaky ground.
The forecasts of economic researchers predict an average inflation rate of 6% for Germany this year. A trend reversal away from recession is not expected until autumn at the earliest - and only on the assumption that the Ukraine war does not escalate further and does not spread to Nato territory, that there is no energy shortage in the coming winter and that a global financial crisis does not materialise despite the rapid interest rate turnaround by the central banks.[7]
German economist Bert Rürup recently summed up the problem of German economic policy in a harsh commentary: "Unlike at the turn of the century, when Germany was called the "Sick man of Europe" by the "Economist", today there is no public debate about growth-promoting structural reforms. Instead of stimulating market forces, the German government conveys that its policies are capable of permanently shielding citizens from the consequences of inflation while saving the world's climate with ambitious targets and harsh bans."[8]
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