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Are you worried about the German economy, Economist?
Economist & Photographer / No. 66
P: Good morning, Economist.
E: Good morning, Photographer.
P: The German economy is shrinking. Are you worried, Economist?
P: Why not?
E: Generally speaking, Germany is a democracy. Democracies are very good at solving problems. If the current government does not manage to solve the problems, it will be replaced by another.
P: That is actually very general.
E: The German government is currently under pressure due to the lack of economic growth. Now reforms are to come. Less bureaucracy, tax relief for companies. The industries affected have the ability to make their voices heard. So it will be not as bad as all that.
P: Will that be enough?
E: We will see. In fact, the problems are only partly to be found in Germany.
P: What do you mean?
E: Germany exports more to China than to any other country in the world. However, China is currently facing a serious economic problem. And it is questionable whether the authoritarian structures there can permanently stimulate the economy. Therefore, the weakening economy in China could become a permanent problem for Germany. We will export less there. Plus, trade with China may decrease in the future for political reasons. Just imagine China going to war with Taiwan. So what we need in Germany is more globalization, not less. New sales markets will reduce dependency on China.
P: Anything else?
E: As is well known, the high energy prices due to Russia's invasion of Ukraine have put pressure on the German economy and increased prices. The European Central Bank fights inflation but at the expense of growth. With falling inflation, the problem will be resolved in the medium term. And as inflation falls, consumption, which has faltered, will rise again.
P: I don't understand.
E: Costs have risen faster than wages. So, real wages have fallen. People could buy less. So we are lacking in demand. Rising wages due to current collective bargaining and falling inflation will counteract this.
< silence >
P: Where do you keep getting your optimism from, Economist?
E: We are all responsible for what the future holds in store. So how could I prophesy evil but instead fight for a better world? Optimism is a duty, the philosopher Karl Popper once said. I love Karl Popper.
P: Well said. Have a nice day, Economist.
E: Have a nice day, Photographer.