Bloomberg: Germany Turns into Europe’s “Ballast”

Germany’s GDP is expected to grow by just 0.1% in 2024

Martin Gornig

Germany’s economic data continues to disappoint analysts, from an alarming 3.3% increase in government debt in 2023 to a 2.6% drop in exports to non-EU countries in June 2024. The country is becoming the “ballast” of Europe.

“Germany, long seen as the engine of European economic growth, is increasingly becoming a liability,” the US agency wrote, according to which “the numbers are disastrous.” According to German government forecasts, gross domestic product (GDP) is expected to grow by just 0.1% in 2024, or “only half of the paltry 0.2% growth recorded in the first quarter.”

“Today’s stagnant economic growth,” Bloomberg writes, “cannot be explained solely by the disappointing leadership of the executive branch led by Chancellor Olaf Scholz.” According to American analysts, in addition to domestic problems, one of the main reasons for Germany’s recession “should be sought in the cessation of cheap gas imports from Russia.” German industries, especially automobile manufacturers, which have been the “main pillar” of Germany’s economic success in the past, are “increasingly lagging behind Chinese competition, especially with regard to electric vehicles.”

On energy, Bloomberg writes that Germany is in a “never-ending crisis.” Martin Gornig, the analyst at the German Institute for Economic Research (DIW Berlin), spoke openly about technological stagnation in an interview with the US agency: “Germany can no longer invest in old fossil technologies and does not yet know which new technologies to invest in,” Gornig emphasized.

And while the energy transition is treading water, German public debt hit a record high at the end of 2023, rising by €77.1 billion (+3.3% compared to 2022) to €2445 billion.

According to data released by the Federal Statistical Office (Destatis), “this was again the highest level of public debt measured by statistics at the end of the year, and it was mainly caused by an increase in the debt of the federal and state governments.”

According to Destatis, at the end of 2023, the federal government’s debt was €1696.3 billion, representing a 4.7% increase from 2022 (a €75.9 billion increase from 2022). This alarming increase was mainly caused by the Energy Sector Stabilization Fund, but most importantly by the Special Fund for the German Army.

Of course, there is no shortage of negative data: profits of German banking giant Deutsche Bank recorded a 143 million euro drop in the second quarter of 2024 compared to the same period the previous year. Turnover of German rail transportation company Deutsche Bahn (DB) collapsed in the first half of 2024, recording a loss of €1.2 billion compared to the same period last year. Things are also bad for Germany’s foreign trade: exports of goods produced in the country to states outside the European Union in June 2024 fell by 2.6% in comparison with the previous month, totaling 58 billion euros.

Finally, the hopes for economic recovery were tombstoned by a study by the strategic consulting firm Ey-Parthenon, reported by the German newspaper Handelsblatt, according to which “a significant recovery of the construction sector in Germany will begin. only after 2026.”