Once wonderful times: the German economy has been stagnating for six years!

Once wonderful times: the German economy has been stagnating for six years!

What's going on in the German economy? According to information from the taz the economy stagnated in the summer. This development is a bitter setback for many, as the economy has not shown any signs of growth for six years. A decline of 0.3 percent had to be accepted as early as spring 2023, and this trend is continuing.

In August, the value of exports also fell by 0.7 percent, underlining the ongoing weakness of the export-oriented German economy. The number of unemployed people has fallen slightly - by 44,000 to a total of 2.911 million - but this is no reason to be happy either. Andrea Nahles, head of the Federal Employment Agency, warns of the weak employment development and the low demand for new employees.

The challenges for the industry

The problems are particularly noticeable in the automotive industry. The consistently high level of competition from China and the sometimes unpredictable US trade policy are putting the German export industry under enormous pressure. The German Institute for Economic Research (DIW) emphasizes that the automotive industry is particularly affected by these challenges. In 2022, motor vehicles and parts were Germany's top export goods, worth 264 billion euros, but Volkswagen reported a loss of 1 billion euros in the summer. Mercedes is also hit hard: its profit fell by 31 percent to 1.19 billion euros, while sales in China and the USA fell by around 27 percent.

The Martin Georg Foundation warns that the weak economy and declining industrial production could have long-term consequences. The railway and construction industries are showing initial signs of stabilization, but this will not apply to all sectors. The investment package of 500 billion euros, which is intended to stimulate the economy in 2024, could be the decisive step in getting the economy out of the slump.

A look at the Eurozone

Where is all this leading us? Eurostat reports marginal growth of 0.2 percent for the entire euro zone in the summer. This gives hope, but at the same time is a warning signal for Germany, where experts are forecasting only slight growth of 0.2 percent for 2025. Silke Tober from IMK criticizes the European Central Bank (ECB) for its decision to leave the key interest rate at 2.0 percent and believes it is necessary to re-examine economic stability.

At a time when economic conditions are constantly changing, it is important to react to developments precisely and in a timely manner. Whether the German economy can return to the path of growth remains questionable. The response from the trade unions to the reform agenda of the black-red federal government is not diminishing, and criticism of possible benefit cuts for the unemployed will continue to be loud.

What remains is the question: How stable will the German economy prove under these circumstances? A definition of stability might be useful here, as described in the Merriam-Webster Dictionary: It is to be "not easily changed" and to resist forces that might cause movement. Whether current developments live up to this definition remains to be seen.