The German economy has been facing significant challenges in recent years, reflecting a trend of stagnation that has persisted for five consecutive years. The years 2023 and 2024 have seen the economy not only fail to grow but contract, signaling alarming signs for what has often been considered the locomotive of Europe. The news coming from Germany’s bigger companies about layoffs has raised questions about the deep-seated issues influencing this downward trajectory.
One of the perspectives on this decline comes from Fritz Reischling, an expert who emphasizes that the layoffs are symptomatic of deeper structural problems within the economy. He highlights the instability of the global economy and the tumultuous geopolitical landscape as major factors exacerbating these issues. The current predicament can be partially attributed to how Germany perceives its relationship with the global economic community.
During a recent meeting of the German-Asian Business Association in Hamburg, an influential organization steeped in over a century of history, Reischling noted that a prominent expert pointed out that we have entered the 'Asian Century'. This assertion calls for a reevaluation of longstanding attitudes among many Germans regarding nations like China and India. Acknowledging the economic and geopolitical realities of this century is crucial. If German enterprises aspire to maintain their international competitiveness, cutting ties with these important markets is simply not feasible. This cut-off would affect not only market and production capacities but also innovation and future prospects, especially with respect to China.
Reischling asserts that the very essence of German economic strength lies in its commitment to innovation, foundational research, and exceptional manufacturing practices, alongside the tenacity of its entrepreneurs, managers, and workers. However, in recent years, Germany's competitive edge in these areas has been waning. For instance, companies increasingly prefer to establish their latest production facilities outside Germany. Furthermore, innovations and technologies that achieve technical readiness for industrial application are few and far between, plagued by bureaucratic inefficiencies and a lack of adequate funding.
The sentiment expressed by Reischling is one of cautious optimism, claiming that with appropriate political leadership, these challenges are surmountable. He emphasizes the necessity for a cultural shift in Germany's public perception towards viewing productivity and performance in business as admirable and appealing. Despite many individuals in Germany harboring aspirations to innovate and transform the world, pervasive feelings of frustration and obstruction within the existing social and economic framework dampen such ambitions.
A recurrent theme among the German populace, when discussing their economic reality, is a profound sense of vexation rooted in the bureaucratic nature of their systems. Reischling underscores that while bureaucratic frameworks are essential for constructing order, stability, and trust—particularly in economic contexts—the inefficiencies intrinsic to German bureaucracy are abundantly clear. Drawing on his extensive experiences in China, he reveals stark discrepancies in the operational hurdles faced in Germany, particularly when establishing or running a business.
He recounts a typical scenario of starting a business in Germany: after submitting all requisite documents, one may still wait three months—far longer than the mere days or weeks that might occur in other regions—until the business registration office processes the application. Similarly, if a new enterprise's founders include both Germans and non-Germans, securing a business bank account can become a laborious task, requiring visits to multiple different banks over several months.
Furthermore, for businesses exporting goods from Germany to Sweden, the last decade has required tedious monthly submissions of extensive documentation fortifying their authenticity as legal entities to customs. Reischling contemplates why, in the face of digitization and progressive reforms, countries like the Czech Republic or Lithuania can streamline their bureaucratic processes while Germany cannot. The crux of the question lies in whether the political landscape is prepared to reclaim agency and whether German society comprehensively understands what is vital for its future.
He urges that whichever political party takes the reins in February 2025 must focus significantly on revitalizing Germany’s ailing infrastructure, making substantial investments in new systems like green energy and digital transformation, and bolstering defence and military capabilities within Germany and broader Europe. A concerted effort is also necessary to reduce operational costs for businesses while fostering a greater emphasis on innovation, research, and future technological infrastructure.
Reischling points to glaringly long-standing oversights and misjudgments across various sectors, particularly within the automotive industry, as a critical example of a broader systemic problem. The need for change is evident, yet he cautions that the real challenge lies not within financial resources but rather within the collective mindset of German society and its political leadership. The ongoing debates surrounding vacation days, remote work policies, and reduced working hours distract and deflect from the broader discussions about Germany's transformative path in this fundamental period.
Lastly, while Reischling does not see a swift return to purchasing Russian oil and natural gas, he emphasizes that true reform and revitalization of the German economy hinge on a central realization from its leaders: acknowledging the extent of the transformative pressures faced, arguably the most profound since World War II. This recognition is essential for the German economy to harness the genuine new impetus it so desperately needs.