“Germany has a really big problem”

Why is the German economy lagging so far behind?

Business investment has fallen sharply and Germany has not made any gains in foreign trade. Consumers have also spent less, even though employment has risen and wages are rising faster than inflation. But besides money, consumer mood is also important for spending. And that mood doesn’t mean much at the moment. People are pessimistic, and that’s also true of the German business community. In recent months, it has become clear that confidence among German companies is declining, and consumers can see that too. He thinks: If companies are investing less, then maybe I should worry about my job and save more. So people are putting more aside.

So we're talking about cyclical and structural problems.

Indeed. The cyclical problem is that demand for German goods abroad, especially in China, is much lower than before. Moreover, there is a great deal of political uncertainty in the country. Germany also has a major structural problem. Previously, they had cheap gas and an endless supply of cheap labor, because the EU expanded to Central and Eastern Europe in 2004. But you can draw a line between these two things. I don’t see how you can get out of this easily.

Government spending remained at the same level in the last quarter.

This is actually the only engine that hasn’t broken down in Germany. But it’s really just a spare engine, you don’t want to fly on it. I’m a big advocate of sound public finances, which means a low budget deficit and a low national debt. But not at any cost. The German economy has been growing very strongly for a long time. One consequence is that people in Germany take a strong economy for granted, and the result is that they invest very little in digitization and new infrastructure. You have to have these kinds of things to eventually get out of this valley as a country. Given the state of German public finances, I now consider it highly irresponsible to continue to insist on no budget deficit and no national debt.

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