The German Economy Is On The Brink

The economist Herbert Stein once wrote that if something cannot go on forever, it will stop. It seems like the German — and with it probably the European — economy is reaching that point. Most of Europe’s 100 largest companies were founded in the 1980s or before, which means that the old continent has entirely slept through the digital revolution of the 1990s and 2000s. There is no European counterpart to American corporations like Facebook, Amazon, E-Bay or China’s Alibaba or WeChat.

This became painfully clear during the Covid pandemic, when the once vaunted German bureaucracy was revealed to rely on paper, pens and fax machines in its health care system due to a complete lack of digitalisation in key areas. Not surprisingly, the German economy shows cracks elsewhere as well. Measured by market capitalisation, only one German company makes it into the top 100 worldwide, and German market capitalisation as a share of global market capitalisation has shrunk to 1.97%, an all-time low. These are devastating numbers for a country that just a few years back was seen as a model for the world with its transition to Green energy and the planned exodus from nuclear power.

In fact, to add insult to injury, one of the largest German producers of rotator blades for wind turbines has announced it will close down production in Germany and move to India. Similarly, Villeroy & Boch, a company that has produced tiles in the German city of Merzig since 1879 will retire its factory and move manufacturing to Turkey, quoting high energy and labour costs as the main reason. One could argue these are just anecdotes, but it is probably no coincidence that for the first time in 30 years Germany posted a trade deficit of over one billion euros, meaning that Germans are importing more than they are exporting.

More: Germany Is Quietly Shutting Down As Energy Crunch Paralyzes Economy

According to the FT, Germany is now rationing hot water, dimming its street lights and shutting down swimming pools as the impact of its energy crunch begins to spread like the proverbial Ice-Nine wave, from industry to offices, leisure centers and residential homes.