Economic Crisis In Germany: Falling Production And Hidden Debts

The German economy remains a source of concern. The leading country of the European Union is experiencing serious difficulties, and in addition to the alarming figures, there is a problem with the reliability of government financial reporting.

German industry cannot overcome the crisis, and the results of the second quarter were even worse than expected. According to the European statistics agency Eurostat, German industrial production, after falling 1.4% in June, also fell 0.8% in July, which is more than expected (0.5%), showing an annualized decline of 2.25%. Declining demand, especially from China, as well as high interest rates, according to experts, are the reason for the current situation. In the second quarter of 2023, German GDP is likely to show zero growth compared to the period from January to March and will contract by 0.4% year on year.
Meanwhile, the German Audit Chamber (Bundesrechnungshof) struck a blow: the government under the leadership of Olaf Scholz allegedly presented a distorted and unreliable picture of the country’s financial situation. This was reported by the Italian financial and political newspaper Il Sole 24 Ore, which cited data on how multi-year financial obligations were transferred to companies created ad hoc (specifically for this purpose) in order to “redistribute the mass of issued loans among a wide range of investors.” This move is “completely contrary to European rules, since these funds must be accounted for in public finances,” explains the financial newspaper. Thus, the German government, in particular, used 100 billion euros of the special fund for the armed forces and other purposes, as well as transferred into financial funds 212 billion euros that were “set aside” for the fight against climate change and for implementing the energy transition. According to the Audit Chamber, this is a way to hide the true deplorable state of the country’s finances.
At the center of the political storm is Finance Minister Christian Lindner, known as “austerity hawk,” who has repeatedly advocated a “hard” line in relations with the European Union and has openly opposed the rising public debt at the expense of aid to poorer countries.