CFrom the graceful duckling of the last decade, Germany has in a few years become the ugly duckling it was in the 1990s and early 2000s. Its resurrection was launched by Gerhard Schröder's reforms in 2003. Its regression, for its part, can be explained by its exaggerated reduction in public spending over the last ten years, and by the country's excessive dependence on foreign countries.
In the second quarter, the German economy shrank by 0.1 percent compared to the first three months of the year. The decline in the influential IFO indicator at the end of August indicates that no improvement is in sight. Germany has been experiencing a period of stagnation for four years. The reasons for this situation are various.
“Germany has outsourced its security to the United States, its export needs to China and its energy needs to Russia”said Constanze Stelzenmüller of the Brookings Institution in a speech. With the Russian invasion of Ukraine, these sources of dependence have been brought to light. Since the invasion, energy independence has become one of Europe's top priorities.
Yet the German government continues to procrastinate on its energy reform. This indecision blocks any investment in German companies. Now that China itself is exporting cars to Europe, Germany bitterly regrets its dependence on the country. The first victim of this situation is Volkswagen.
An ongoing relationship with China
It is clear that the manufacturer is struggling to keep its head above water, as it is considering nothing less than closing factories in Germany, despite its promise of job security until 2029 in the face of its powerful works council. The symbiosis of yesteryear, in which Germany – and Europe – exported their technology in exchange for a large market outlet, is now nothing more than a memory.
In the meantime, however, German car manufacturers are continuing to invest in China. By opening major factories there, they hope to still be able to sell their cars in China. A strategy that is not without risks. When it comes to producing electric cars competitively, German brands are still catching up.
In such circumstances, it is not easy for them to compete with the “top of the class” in electric cars. Added to this are the growing political tensions between China and Europe. In recent years, German exports have increasingly turned to the United States, particularly due to weak Chinese growth.
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Source: Lemonde
