Germany has seen investors fleeing the country at record levels as it enters its worst economic downturn in years.
A recent study published by the German Economic Institute (IW) revealed huge sums of foreign money are now leaving the country, with in excess of €132 billion more being drained from the economy than entering it.
The news comes as Germany recently said it is now officially in recession. That apparently had knock-on effects in the rest of the EU. Shortly after the revelation, it was announced the Eurozone had followed suit.
The German economic negatives have alarmed many. “The numbers are to be understood as a warning signal that the location is losing its attractiveness: demographics or high energy prices are affecting Germany,” says IW economist, Christian Rusche.
According to observers, rocketing energy prices are certainly the principal driver of the economic malaise. Since Russia’s invasion of Ukraine and the bombing of the NordStream2 pipelines, experts say, Germany has been particularly affected by the loss of Russian oil and gas on which it was heavily dependent. By extension, the prices of basic goods in the country have risen dramatically, driving mass transport strikes in the spring as inflation ate into household budgets.
However, according to some, the influence of the German Green party, part of the country’s somewhat divided coalition government, hasn’t helped matters. Already, the Green’s economy minister, Robert Habeck, has sparked furore with what many see as impractical environmental policies.
Jan Burdinski, a Berlin-based political advisor, sniped: “The Greens play a very unfortunate role in economic terms.”
Referring to Green party policies on tax and its aims to eliminate CO2 emissions, he said that “on one hand they want to give carbon a price, sending energy costs skywards” but also further contribute “by heavily subsidising consumption”.
The end result looks likely to be a form of de-industrialisation. According to a study by the international Horváth consultancy, one in three companies is looking to cut staff in Europe and reinvest in Asia.
For Burdinski, that means: “Corporations, especially those in energy-intense sectors … are doomed and [will] phase out their domestic capacities to move elsewhere.”
For German AfD MEP, Markus Buchheit, a central problem is a lack of restraint regarding the Euro and its effect on the German economy.
He told Brussels Signal that a combination of the Covid lockdowns and the mass printing of the Euro made “Germany less competitive and foreign direct investment is hence taking flight”.
Buchheit added: “Germany is being placed over a barrel by the ECB and European Commission. The quicker we take back control of our own currency and trade policy the better.”
The Horváth study also pinned blame on Germany’s high corporate taxes, ‘leaden’ bureaucracy and an ailing infrastructure, which have all combined to make the country less attractive to investors.
Burdinski added that the German Government’s generally heavy-handed approach to the economy was a major driver of recession: “Whereas the US created an economic environment of incentives and stimulation, Germany mainly uses the stick to execute on policy goals,” he said.
He suggested that, instead, Germany and other EU countries needed to adopt a more positive attitude to business. Otherwise, he added: “The fundamental scepticism towards entrepreneurship will haunt us badly when Asia and America advance and leave Germany, France and Italy behind, bound for economic starvation.”
Brussels Signal approached Germany’s centre-Left Social Democratic Party for comment on the situation but received no response.
