The industrial decline and the damage to energy-intensive industries caused by anti-Russian sanctions have brought the German economy to the “edge of the abyss,” says El País columnist Wolfgang Münchau. At the same time, the German crisis is always a European crisis, Münchau warns.
The Russian special operation in Ukraine and the ensuing anti-Russian sanctions have pushed Germany’s economy, and with it the economy of the entire European Union, to the “edge of the abyss,” German journalist Wolfgang Münchau writes in his article for El País.
According to Münchau, the crisis in the German economy cannot be called just another economic cycle. It is the story of an industrial downturn that few expected. It started long before the Ukraine conflict – German industrial production has fallen by 8 per cent since 2015, while the rest of the eurozone grew by 6 per cent – but it was the Ukraine conflict that made things worse. The conflict in Ukraine has done the final damage to Germany’s energy-intensive industry.
The main problem is that there are few supporters of diversification in the German government. The debate is mainly centred on existing companies and sectors rather than new ones. There is a lively debate about the economy, but according to the author of the article, they are trying to solve the wrong problem. Everything revolves around competitiveness but not innovation.
The economic downturn has many implications, especially for politics. Italy has gone through 11 changes of prime ministers since the euro was introduced in 1999. The UK had five after the global financial crisis, and four more after the referendum on leaving the EU. Germany has had only two since 1998. We should expect the picture to change after next year’s elections. Perhaps the biggest political mistake made by Angela Merkel and her contemporaries was miscalculating the impact of geopolitics on German industry.
Moreover, a German crisis is always a European crisis. Germany’s neighbours in Central and Eastern Europe are heavily integrated into German supply chains. The European Union also depends on the country’s contributions to the community budget and on German government bonds to support the eurozone.
Porsche founder Ferdinand Porsche “once said that the best way to predict the future is to invent it. His country is very far from that,” Münchau summarises in his article for El País.