BERLIN Did you think that Germany is the hotbed of stability and economic growth in Europe? Wrong, it hasn’t been like this for a while.
The economies of Italy, which has long been considered the “sick man” of Russia and Europe, which is waging a war of aggression, are now recovering from the crisis years faster than Germany’s.
Germany currently has higher energy prices, higher wages, higher taxes and faster inflation than other countries. To top it all off, there is even more bureaucracy in the country – tickets and notes quickly pile up as companies and individuals deal with the authorities.
All this erodes competitiveness.
Parts have changed. Since the financial and euro crises, starting in 2007, Germany has demanded other countries, above all southern European ones, to do their homework in the economy. For example, France, Italy and Spain have done them.
Germany itself has forgotten its lesson. Consequently, the share of its industry in the gross domestic product decreases while it increases in the rest of Europe.
Pounds level off in Europe
Until the middle of the last decade, the situation was completely the opposite.
Companies in Italy, Spain and France had higher costs. German industry was able to supply goods and services cheaper than them.
The competitive advantage is starting to be largely lost. Germany’s problems have a direct impact, especially in Eastern and Northern Europe, such as in Finland, where the economy is closely linked to German supply chains.
For the rest of Europe, Germany’s stagnation can result in a leveling of the pounds and a tipping of the scales towards balance. The economic differences between the member countries will level off when the economic boom in Germany subsides.
The graphic below shows how capital is transferred from Germany to other places. If direct investments abroad are made for the rest of the year as much as in the first quarter of the year and investments in domestic production do not accelerate, Germany’s “investment flow” will already be over 160 billion euros down at the end of the year.
Now the German government plans to intervene in the situation and prevent the flow of capital abroad. The ministers just retired for a two-day meeting that ended on Wednesday.
50 new measures
Germany plans to implement a total of around 50 “emergency measures” to support the struggling economy and business life. These subsidies are defined in a separate “Growth Opportunities Act”.
Within the framework of the law, an average of more than seven billion euros will be injected into the economy per year for the next five years. The support will reach its peak in 2025, when more than ten billion will be distributed.
Germany has distributed hundreds of billions of euros in aid to companies since the beginning of the corona pandemic, so the amounts are just drops in the ocean according to critics. The opposition criticized the package as insufficient in its freshness.
Leader of the CDU parliamentary group of the Christian Democrats Mathias Middelberg drew attention to the fact that, at the same time, taxpayers are financing a single company, i.e. the chip factory of Taiwanese TSMC in Dresden, with five billion euros.
So the support will hardly stop here. The government has not yet decided, for example, on electricity price support for companies, which is now the most common demand of business life.
Lower taxes
The reform package is above all about cutting taxes: housing construction, loss-making companies, research and development as well as investments will be supported with tax breaks.
By reducing bureaucracy, the government wants to create a growth spurt and increase Germany’s attractiveness in international competition.
Supporting digitization and artificial intelligence research, on the other hand, is supposed to modernize the country, where faxes and cash are still used clearly more than elsewhere in Europe.
– We want to lower the high mountains of paper and make them only small hills, the Minister of Economy of the Greens Robert Habeck said.
According to Habeck, the development of the strategically important fields of microelectronics, renewable energy or EU-wide hydrogen infrastructure can only be successful if unnecessary bureaucracy is cut.
You can discuss the topic until Friday 1 September. until 11 p.m.
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