Don't try to take the easy way for growth in Germany (because there isn't)

1000 ways to improve our lives / No. 47

Good morning from Germany,

Germany is at the bottom of the list of European countries when it comes to growth. While the eurozone's economy has returned to growth after a long period of stagnation, the German economy continues to suffer. 

Why the difference?

Experts say it's partly because the manufacturing sector in Germany is larger and demand for goods remains in contraction.

But there are at least two more issues. There is a lack of workers and companies are investing too little in Germany.

Germany's ability to attract business investment suffered a steep decline in 2022, when more than €135 billion of foreign direct investment flowed out of the country, and only €10.5 billion came in, according to the Cologne-based German Economic Institute. 

The reasons? "The investment conditions in Germany had recently deteriorated again due to high energy prices and the increasing shortage of skilled workers," said Christian Rusche, an economist at the Institut to the Financial Times. 

In Germany, meanwhile, a heated debate has flared up about how the economy can recover. The proposals discussed: Reduce taxes on the price of electricity, reduce VAT, reduce corporate taxes, and increase government spending. 

For most economists, most proposals miss the point, since what is mostly needed is more people working and more people working longer, plus making companies more willing to invest.

Bottom line: There are no simple solutions for getting Germany back on the growth track. So the topic will concern the country for quite a while, I guess.

Greetings from Germany,

Johannes Eber

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