On Thursday, November 14, the “Sueddetusche Zeitung” newspaper published an interview with economic expert Monika Schnitzer. She is one of five advisers to the German government within the German Council of Economic Experts, known as the “Group of Five Wise Men”. Schnitzer presents a pessimistic picture of the state of the German economy. It reminds that it is stagnating and, according to the forecast, it will shrink slightly this year. Only a slight increase is expected for next year.
– I am even more worried about the comparison of the last five years: compared to 2019, the German economy grew by only 0.1%. Zone countries euro grew by an average of four percent, and the US economy by twelve percent, says Schnitzer.
Industry in the worst situation
According to the economist, industry is in the most difficult situation. The rule that when the global economy is doing well, it has a positive impact on German exports is no longer valid. – One of the reasons is high labor and energy costs. But that's not all. We also see that the products of German industry are no longer convincing. It is difficult for manufacturers to compete with competitors from China, for example, whether in the case carsor machines. We are dealing with more competition – admits the expert. In her opinion, she wants to continue selling at higher prices pricesGermany would have to offer more, and the industry is unable to do this.
As a consequence, companies that export less also invest less on the domestic market. In addition, there is another new effect: “Consumption no longer responds as strongly to real income as it used to.” – Actually, everything speaks for an increase in consumption: inflation decreased, income increased. We would have expected consumption to increase – but it didn't, at least not as much as we thought. There is simply no trust, people are uncertain – explains Monika Schnitzer.
Politics doesn't help
The expert believes that there will be further layoffs soon, but she does not expect a sharp increase in unemployment.
According to Schnitzer, the breakdown of the ruling coalition, premature elections to the Bundestag and the probably long process of forming a new government will postpone certain reforms that would help the economy. It mentions, among others: special tax deductions for a larger number of investments or the reform of the debt brake, which – in her opinion – is more restrictive than necessary.
“A Russian victory would be disastrous”
According to the expert, the presidency will have a negative impact on the German economy Donald Trump. “Trump will create problems for Germany in many respects. German industry will suffer significantly from further tariffs. Ukraine will need our support more than ever before and we will have to do even more to defend it. We face further expenses and we cannot shy away from them: A Russian victory would be disastrous and would cost us many times more,” says Schnitzer.
He adds that climate policy will also become more difficult if the US refuses to cooperate. In such a situation, as the damage caused by climate change increases, more refugees from countries that are no longer livable will head west. Schnitzer also calls for European cohesion. He emphasizes that “it has never been more important for the EU to unite and strengthen its economy” by developing the single market, new technologies and the capital markets union. – The German economy should not be left behind – he warns.