The main German economic institutes are almost unanimous. The end of the year does not bode well for Europe’s leading economic power. According to their latest projections, Germany should see its growth decline by 0.6% in 2023. A gap. Six months ago, Olaf Scholz’s government was still counting on… an increase in GDP of 0.4%. The fault, first of all, is the explosion in energy prices, on which German industry, the country’s strong point, is very dependent.
Fed by Russian gas for years, Berlin had to change its tune, after the start of the war in Ukraine, to turn to other, more expensive suppliers. A subject which causes tensions within the Franco-German couple – if indeed it still exists -, while Germany plans to subsidize the industrial sector. In addition, rising interest rates limit business investments, while inflation has a lasting impact on household consumption. Added to this is the decline, in recent months, in trade in goods with China, Germany’s leading trading partner, but also with the United States.
Privileged commercial ally
Beware of the adages, the misfortune of one does not always bring happiness to others. And France would be wrong to boast, even if its economy will fare better this year, with growth of 1% expected by the executive – when the Banque de France anticipates +0.9%. The German slack does not help French affairs, because our close neighbor remains a privileged commercial ally. In 2022, France exported some 80 billion euros worth of goods across the Rhine, far ahead of Italy (54 billion) and the United States (48.1 billion).
So, when German growth and consumption are at half mast, our trade balance suffers. The weekly Der Spiegel Although we described France as “Germany but better” a few weeks ago, reality always catches up with us. The match between the two European champions seems long lost. Despite the reindustrialization policy initiated by the French government, it will still take years to recreate a solid business network and hope to compete with Germany. And to move forward, France will necessarily need renewed vigor in the German economy which is not expected before 2024, at best…