Prof. Dr. Jan Viebig Global Co-CIO, ODDO BHF AM.
“Hope dies last. A clear reform agenda could revitalise growth and lead to greater prosperity and employment.”
Is Germany once again the “sick man of Europe”?, economics columnist Martin Wolf in an article for the Financial Times in the summer of 2024. In the election campaign ahead of the early Bundestag elections on 23 February, the question is becoming a hot topic again. In its economic outlook from January 2025, the International Monetary Fund (IMF) predicts a decline in German GDP of 0.3 per cent in 2023 and a further decline of 0.2 per cent in 2024. We expect Germany’s growth this year to remain below the eurozone’s weak growth of 1.0 per cent. The severity of the crisis in Germany can be seen in the latest figures on industrial production in Germany. According to the Federal Statistical Office (Destatis), price-adjusted production in the manufacturing sector fell by 2.4 per cent in December 2024 compared to the previous month. The automotive industry recorded a particularly sharp decline in production. Production in energy-intensive industries is also very weak, which is not surprising given that energy prices in Germany are currently more than twice as high as in the USA.
Germany’s weak growth is of a structural nature. Labour productivity in Germany has been,stagnating for some time. From an economic perspective, the findings are clear: investment is needed to increase value creation, particularly in new technologies and artificial intelligence. In our view, the state’s share of the economy in Germany is too high, as is the burden of taxes and duties on companies. Another topic that is unfortunately unpopular and often concealed before elections is that social transfers and subsidies should be reduced if they inhibit employment and the economy. A comparison also shows that Germans work too little in relation to the number of hours they work. We are convinced that the highly consumptive government spending should focus more on investments in education, infrastructure and – in view of the geopolitical challenges – also on defence
This morning, a medium-sized entrepreneur told me that the approval of fibres that go into building materials, for example, can take over three years in Germany, while comparable approval procedures in other countries take a few weeks or months. You hear this kind of comment all the time when you talk to SMEs, which employ the majority of the labour force in Germany.
