Daniel Stelter: How is Germany doing?
A brief diagnosis – by Dr. Daniel Stelter
The diagnosis: Worse than most people think
Germany is in its third consecutive year of stagnation. Industrial production is around ten per cent below 2018 levels. Real per capita prosperity has not risen since 2019. Measured by disposable income, we have fallen behind within Europe. This is not a temporary economic dip, but the result of structural missteps that we ignored for two decades because a favourable global backdrop gave us time – cheap Russian gas, open Chinese markets, low interest rates, a stable American protective power.
The tailwind has turned into a headwind
Each of these pillars is crumbling simultaneously. Energy prices are permanently twice as high as in the US. China has gone from being our biggest customer to a serious competitor in every field where we were previously world market leaders: cars, machinery, chemicals. Interest rates are back, and with them the cost of a debt burden that is driving the public spending ratio towards 50 per cent. The US is withdrawing from Europe – both in terms of security policy and the economy.
Structural weaknesses, of our own making
Added to this are problems we have created ourselves. Demographics: By 2035, Germany will lose a net total of around five million people of working age. Education: In international comparisons, we have been falling behind for twenty years. Infrastructure: Bridges, railways, digitalisation – all dilapidated or unfinished. The state: A bureaucracy that stifles innovation rather than enabling it. Estonia digitalises in months what takes us decades. Finally, energy policy costs 36 billion euros a year without guaranteeing security of supply.
The political deadlock
The problem is not that we are unaware of the situation. The problem is that the political debate revolves around the status quo, whilst the AfD and the Left Party together command a third of the electorate – both with solutions that would exacerbate the problem. The established parties are concerned with distribution, not with the conditions of the prosperity that is to be distributed. The demonstrations against Economics Minister Reiche illustrate this perfectly: the protesters are fighting for the continuation of a policy that has not worked for 25 years.
What is needed
Germany needs an Agenda 2030 – a reform package as radical as Agenda 2010 once was. At its core: an energy policy based on physics and economics, with technology neutrality rather than ideology. A drastic reduction in corporation tax and the tax-to-GDP ratio. Debureaucratisation following the Estonian model. Mobilising productive capital: German households hold €2.9 trillion in non-interest-bearing current accounts. A sovereign wealth fund modelled on the Swedish or Norwegian examples could put these funds to productive use. And an honest migration policy that seeks skilled immigrants rather than accepting unskilled ones.
The France warning
Anyone who wants to know where we are heading if we do nothing should look to France: public spending at 57 per cent, a deficit of over 6 per cent, political paralysis, credit rating downgrades, an elite living off the country’s assets. Germany is heading down exactly this path – only with a fifteen-year delay and from a weaker starting position.
The good news: it is not too late. Other countries have managed a turnaround from comparable situations – the Netherlands, Sweden, even Germany in 2003. The bad news: time is running out. Every year without reforms makes the necessary cuts more drastic and a political majority less likely.
Conclusion
Germany is not a lost cause, but it is at risk. We have the resources, the engineers, the capital and the institutions to defend our prosperity. What we no longer have is time – and, so far, the political will. The way out of this impasse begins with an honest assessment.
Book Dr. Daniel Stelter as a panellist for a discussion or as a speaker: +1 (704) 804 1054 – daniel.stelter@premium-speakers.com