The annual economic report shows Germany’s economic weaknesses. The country suffers from bureaucracy, a shortage of skilled workers and high energy costs. For some companies, production in Switzerland is now even cheaper.
Switzerland is best known in Germany for exclusive watches and chocolate. A few years ago, no one would have thought it possible that production in the high-priced neighboring country could suddenly be cheaper than in this country. Now the Swabian chainsaw manufacturer Stihl is considering expanding its production there – and not in Germany.
The chairman of the supervisory board Nikolas Stihl explains in daily News-Interview that Switzerland has lower overall costs than Germany despite higher wages. Higher duties, taxes and energy costs in this country are to blame – production in Switzerland is now cheaper.
“Cause for concern”
Economic crisis everywhere: German corporations are laying off thousands of their employees, the traditional manufacturer Miele is moving parts of its production to Poland. Germany is suddenly the “sick man” of Europe again – things are going better almost everywhere in neighboring countries. Today, the federal government gives itself the calculation for this on 176 pages: In the annual economic report, the federal government reduces its growth forecast for Germany from 1.3 to 0.2 percent for the current year.
Economics Minister Robert Habeck from the Green Party sees “reason for concern” and speaks of an economic outlook that is shaped by the geopolitical crisis. According to Habeck, the reasons for the poor outlook are also due to world trade that is developing at a “historically low level”, the loss of purchasing power due to inflation and high interest rates.
Habeck sees the greatest need for action in bureaucratic hurdles and the shortage of skilled workers, which is now not just limited to skilled workers. “Every corner and edge is missing,” is how he describes the situation on the labor market. Filling the 700,000 vacancies would have a significant growth effect.
The government has lost trust
Habeck also admits that the traffic light government is partly to blame for the country’s economic problems. Because of the many disputes, the government has lost trust. The President of the Munich Ifo Institute, Clemens Fuest, also sees this as a home-grown reason for the economic uncertainty.
However, there is also progress to be reported: exports rose by 0.6 percent after falling by 1.8 percent last year. The federal government also expects inflation to fall significantly to 2.8 percent. In the previous year the value was 5.9 percent.
The figures represent a move closer to normality and could pave the way for interest rate cuts in the summer. These, in turn, would help stimulate growth.
Falling behind internationally
Finance Minister Christian Lindner, FDP, also joined the ranks of critics in the government survey in the Bundestag – and attested that Germany has “too little economic dynamism.” Germany has fallen behind in all international studies. The government now has to face structural problems.
This is also what it says in the annual economic report. It outlines ten areas of action to strengthen competitiveness; However, economists criticize that the report fails to provide concrete measures. A measure already passed by the government and the Bundestag, the “Growth Opportunities Act”, is currently being blocked in the Bundesrat. Ifo boss Fuest praises the package as going in the right direction, but is “a drop in the ocean.”
Mood like after Brexit
Tax cuts for companies and citizens could provide impetus, but Ministers Habeck and Lindner are currently arguing about financing: Habeck wants a special fund, Lindner no new debts.
The deputy chairman of the Union parliamentary group in the Bundestag, Jens Spahn, describes the current mood of the German economy with the situation in Great Britain after Brexit and refers to a twelve-point plan that his party proposed to the federal government last week. It contains a restriction on social security contributions for companies, but also more incentives to work. Economist Fuest also complains that it is no longer worthwhile for many people to work full-time today – the social and tax systems are not properly coordinated.
The federal government and experts agree that the annual economic report can only be a beginning, a kind of “foundation,” as Habeck calls it. The problems are described. The federal government has so far failed to provide concrete solutions.