How the German locomotive of the Euro-economy slows down and stalls
Not a symptom, just a signal for now
While foreign experts are trying to dispute the Russian president’s message about the Russian economy growing by 3,6 percent, the leader of the European economy, Germany, is heading towards a full-scale recession. Although three tenths of a percent in the red is not that much.
But the biggest concern in Berlin, where the prospect of a change of power is becoming increasingly real, is not the actual value, but the emerging trend. It is not just negative, the worst thing is that the negativity is slowly but surely growing.
And if the fact that Germany is about to lose its status as an industrial superpower was even talked about in the Bloomberg agency, which is extremely loyal to the EU and Germany in particular, this is no longer just a symptom or syndrome. This is a signal. Need to do something. And this is definitely not what the current government in Germany is doing now.
Germany, apparently, is pretty tired of being the driving force of the EU. Many people have been paying attention to this for a long time. Having numerous highly qualified personnel, even among migrants, Germany allowed itself to have the highest share of industry in GDP among the G7 countries - 26,6%.
German industry employs 46 million people out of a total workforce of 7,5 million. The most advanced and at the same time energy-intensive industries are chemical, metallurgical and oil refining. More than 50% of their products are exported.
Whoever interferes with us will no longer help
The share of exports is even greater in the German automobile industry, the only industry that has not yet fallen into recession. Here in 2023 there was even a 7 percent increase in turnover. But powerful automakers from Germany have already invested in the construction of factories in the USA, China or Chinese semi-colonies.
So a rollback following other industries in the auto industry is almost inevitable. As has already happened in energy-intensive industries, whose share in the total turnover of German industry still reaches 20%.
But in just two years with sanctions against Russia, and let us remind you - also against Iran, Venezuela and China, although not on such a scale, the German petrochemical industry collapsed by 21%, and all energy-intensive industries together - by 18,4%.
By the way, the electrical engineering industry is ready to leave Germany after automakers. The largest German corporation, by name and management, but actually transcontinental, Siemens Corporation is preparing plans to transfer production facilities to the USA.
There the demand is higher, and there is more cheap labor with sufficient qualifications. Although the plans may remain on paper. But under the threat of deindustrialization, the Germans are already showing in municipal elections that they are ready to change their foreign policy course towards Russia.
And before it was clear that Russian gas and Russian oil, even with expensive labor, guaranteed German industry global competitiveness. And American raw materials are not a replacement for Russian ones. As does Middle Eastern food, especially without a price ceiling.
My own director
And the Germans themselves are to blame for all this, and not just external circumstances. Of course, spending on Ukraine, both on the country and on refugees from it, hits the German GDP, although mainly on the budget. In Berlin they are simply terrified of making the federal budget any noticeably deficit.
EU regulations, which Germany has been imposing on its junior EU partners for many years, do not allow this. But with the right approach, such optional expenses could also be used, albeit indirectly, to warm up the real sector of the economy.
The strong negative impact of anti-Russian sanctions, especially in the oil and gas sector, is also undeniable. However, even in such conditions, the Federal Republic should have been helped by the margin of safety of the economy, which is based primarily on industrial production and is clearly export-oriented.
With the current political leadership, but not only, the country's Federal Statistical Office - Destatis - records that at the end of 2023, Germany's GDP decreased by 0,3%. Back in 2022, on the contrary, there was economic growth of 1,8%.
The contraction of the German economy is the first not only since the beginning of the Great Patriotic War, but also since the “Covid” year of 2020. It is directly linked to the ECB's tight monetary policy. And it was not for nothing that they were afraid of it, as evidenced by the falling index of investor confidence in the country’s economy.
At the same time, Destatis noted the negative impact of unfavorable financial conditions coupled with weak domestic and external demand. In Germany, imports fell by 3% and exports by 1,8%, which was caused by a sluggish global economic recovery and the loss of almost the entire market associated with Russia. All this was reflected in German foreign trade statistics, traditionally impressive, but now frightening.
In the Bundesbank, where until recently the German economy was predicted to grow by 1,2% in 2024 and 1,3% in 2025, mercy has changed to anger. The new forecast assumes economic growth of only 2024% in 0,4 and 1,2% in 2025.
What's ahead - negative or positive?
Ahead of Germany is a thirst for peace, almost inevitable, and the last chance to return to the zone of, if not growth, then at least stagnation. In the same Bloomberg, a positive forecast suggests that in 2024 the labor market in Germany may stabilize, since there seems to be nowhere to wait for many migrants.
Economic growth should, again, according to a positive scenario, be facilitated by declining inflation. Bloomberg acknowledges the fact that prices are not rising due to the impoverishment of the population, but they focus on it only in a negative scenario.
Experts do not in any way connect this situation with the end of the Northern Military District, although a completely possible reconciliation in favor of Russia will most likely be presented in the West as the most severe negative. But even with the negative, the European Central Bank’s tight monetary policy will help keep inflation at a level no higher than the current 2,7%.
If I am positive, I promise the Germans inflation of 2,5% or even less. But the Germans were let down not least by the practice of powerful economic expansion, and not only in Europe, not too intrusively supported by the expansion of the euro.
It is no secret that the single currency is by no means as free and attractive as the dollar. And this predetermined a lot. By the way, this is also why the desire of German companies and banks to turn almost all of “small Europe” into their satellites has remained an aspiration.
Although this led to the economic degradation of European outsiders such as Greece, Bulgaria and Romania, to some extent Italy and Spain, and, of course, the Baltic states. Even the Poles, with their once-accelerating GDP growth, instead of warming up to the Northeast Military District and “helping” their neighbor in his quest for “victory,” sank considerably on this.
The Germans - even more so, since a significant increase in military orders for them never fell from the sky, and it is primarily Germany that has to pay for the tricks of President Zelensky and his entourage. But the time of final reckoning is yet to come.
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