Germany's Economic Model Faces Crisis, Lacking Viable Alternatives
Germany's economy is facing a growing sense of crisis as it loses its past engines of growth without finding new solutions. Concerns are rising that the economic slump in Germany could be prolonged due to a combination of factors, including a manufacturing slump, an energy crisis, and an aging population.
The German economy has traditionally established itself as a manufacturing powerhouse. However, the recent surge in energy prices due to the Russia-Ukraine war is significantly weakening the competitiveness of German manufacturing. High energy costs are increasing production costs, making German products less price-competitive, leading to a vicious cycle of declining exports.
Marcel Fratzscher, president of the German Institute for Economic Research (DIW), pointed out that "German manufacturing has been complacent with its past success and insensitive to change." He analyzed that "insufficient investment in digital transformation and the establishment of an environmentally friendly energy system has led to the current crisis." He argues that being stuck in past successes and failing to adequately respond to new technological changes are the main causes of the current crisis.
Germany faces the dual challenge of actively pursuing decarbonization policies while securing a stable energy supply. The German government is expanding investment in renewable energy, but it is still largely considered insufficient to meet the energy demands of the industrial sector. Issues such as the intermittency of renewable energy generation and a lack of transmission infrastructure also need to be addressed.
In particular, the German government's decision to shut down nuclear power plants is raising concerns that it could further exacerbate energy supply instability. It is pointed out that difficulties in securing a stable energy source could further lower Germany's energy independence and increase its reliance on energy imports.
Germany is one of the fastest-aging countries in Europe. The rapid transition to an aging society is exacerbating the shortage of skilled labor, which is hindering the innovation and productivity improvements of German companies. There are also concerns that a shortage of skilled technicians could lead to a weakening of manufacturing competitiveness.
The German government is trying to solve the labor shortage problem by easing immigration policies and extending the retirement age, but no significant effects have yet been seen. Social resistance to immigration policies and difficulties in securing skilled labor remain challenges to be solved.
The German government is pursuing various policies to overcome the economic crisis, but doubts are being raised about their effectiveness. It is pointed out that short-term stimulus measures have limitations in solving structural problems. There is a growing voice calling for improving the economic structure through bold reforms from a long-term perspective.
Some experts point out that the German government's policies are only short-term remedies and are insufficient to solve fundamental problems. The argument that bold reforms are needed from a longer-term perspective to solve structural problems is gaining traction.
The growing concern about the German economy's crisis is compounded by the fact that few experts are offering clear alternatives, highlighting the seriousness of the problem. There is criticism that there is a lack of concrete vision and strategy for finding new growth engines.
Marcel Fratzscher emphasized that "Germany must strive to build a new economic model" and suggested that "investment in future growth industries such as digital transformation, the establishment of environmentally friendly energy systems, and the development of artificial intelligence technology should be expanded." He argues that preemptive investment is needed to prepare for the future era.
