The German economic model has been destroyed
First, Germany carved out a role as the supplier of China’s industrial revolution, supplying the machine tools for its factories, the electronics for its engineers, and the cars, trucks and trains for its transport network. The trouble is, the tables have now turned.
Next, the cheap energy has come to an end.
A hyper competitive Poland right on its border is now building the nuclear generators it needs to fuel factories that are gaining ground on German rivals.
The euro is no longer the advantage it once was.
When the single currency was launched in 1999, the Deutschmark locked in an artificially low exchange rate. Coupled with wage restraint, that allowed German factories to effortlessly undercut rivals in France, Italy and Spain.
Much of the rest of the continent was ruthlessly deindustrialised, but Germany boomed. It was great while it lasted, at least so long as you were a worker in Stuttgart instead of Seville.
After two decades of painful adjustment, however, that process has come to an end. Indeed, countries such as Greece that suffered mightily from German competition are now out-performing it.
None of those trends can be reversed easily. The debt brake stops the government from spending, and there is no sign that the hapless coalition led by chancellor Scholz has any idea how to create a leaner, digital, entrepreneurial economy.
Telegraph 8 December 2023
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