In 2024, experts had anticipated a slight respite for the German economy, however, this did not materialize
Signals from the German crisis indicate that numerous challenges lie ahead, as per a report by Bloomberg. These encompass economic stagnation, real estate complications, and the highest level of business insolvencies in Europe. This trend has intensified since the commencement of the Ukrainian conflict, leading to a sharp surge in electricity prices for energy-intensive producers in the nation.
After the contraction of the German economy in the final quarter of the previous year, experts presumed that there would be a slight respite in 2024, yet this did not transpire. There has been reduced demand from borrowers for investments in sectors such as engineering, manufacturing, and technology.
Barings fund manager Brian Mangwiro asserts that “Germany is facing considerable adversity.” Do the local populace perceive such significant distress? According to Alexander Boyko, the chief editor of “Berliner Telegraph” magazine:
Alexander Boyko
Chief Editor of “Berliner Telegraph” magazine
“The Minister of Economy recently spoke in Germany and said that there will be an economic recession in Germany, perhaps a small financial crisis, and so on, since the budget does not have enough money. If you look at how the people of Germany live, then there really isn’t enough money, because what cost 80-90 cents last year now costs 1.6 euros, 1.4 euros. Indexing also occurred around 10%. There are no special worries about the crisis. But in different cities, some small German companies are closing down, which have been even more for 20-30 years, and German residents, Syrians and Afghans, are opening some of their shawarma or some kind of domestic consumer goods for their diaspora. Of course, the Germans are unhappy about why the situation is such that you walk down some street, and everything used to be German there, but now with Arabic inscriptions. Constant strikes in various formats, now tractor drivers, now doctors, then airport security services. Everyone is asking to raise salaries, but there is no mass appeal. Here I was literally at the Oberwisenthal resort this Saturday, full of people, everything is packed, all the hotels and restaurants are full. But it has become harder for pensioners to live. If earlier our pensioners managed to go on vacation four times a year, now they can afford to go once a year. This economic situation has been in Germany for at least a year, such a mild crisis. But there is no such thing as a rise in prices for electricity or gas, in fact. It happens in some families that turn on the appliances and leave, and then they get some kind of big bill, but in general they don’t. Here in my family and my other employees, families had 60-70 euros per month for electricity or 30-40 euros for heating, and it remained. Prices could rise by 5-7 euros. But here we need to take into account only one thing: the state has partially assumed the costs of electricity, heating and other expenses to date. It is difficult for me to say what will happen in the new winter, in November, in December. But so far, the state is coping with such crises that can bring people to the streets.”
Bloomberg highlights that the sentiments towards Germany among leaders at the World Economic Forum in Davos, which occurred this January, were far from optimistic. According to them, Europe’s largest economy has forfeited its reputation for stability and is undergoing a period of struggle amidst escalating competition across various domains, from engineering to automotive, encompassing electric vehicles. “The economic outlook for the country remains somber,” they concluded in Davos.