Germany - If the economy doesn’t grow...
... battles about immigration, fairness and spending will only get worse.
To keep fringe parties at bay and remain a dependable partner for international allies, the country desperately needs to rediscover its economic and political mojo.
If not, a fretful Germany could become a problem for Europe and the world.
A political firewall against the AfD will reinforce its voters’ sense of being marginalized and ignored.
Meanwhile, the opposition conservatives are now led by Friedrich Merz, whose views on immigration are more hardline than Angela Merkel’s.
(Merz has at least ruled out cooperating with the AfD, and he’s been a strong advocate for military support for Ukraine.)
Germany has spent a decade allowing in refugees from Syria and Afghanistan; even moderates are now in favor of restricting immigration.
Cheap Russian gas and seemingly insatiable Chinese demand for German autos and capital goods gave the country a false sense of security.
Germany’s debt brake remains an impediment to properly funding the country’s needs and makes coalition infighting about limited financial resources inevitable.
Unfortunately, a parliamentary consensus on this topic looks out of reach because changing the constitution requires a two-thirds parliamentary majority
Bloomberg 2 september 2024
Bloomberg Economics analysis estimates that half of the near 7% drop in trend growth since 2019 has been cyclical, and could recover over time.
Unfortunately, at least half of the decline is structural and may never bounce back.
The German auto industry has the added conundrum of having to shapeshift from its familiar domination of the internal combustion engine toward electric vehicle manufacturing, just as China is set to flood the global market.
https://englundmacro.blogspot.com/2024/07/whats-to-be-done-about-germanys.html
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