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OECD: ‘German economy has structural weaknesses’

If Germany had to compete against France in economic performance, it would be loose

By: N. Peter Kramer - Posted: Wednesday, May 10, 2023

This week’s review by the OECD says: “The German economy has structural weaknesses’.
This week’s review by the OECD says: “The German economy has structural weaknesses’.

N. Peter Kramer΄s Weekly Column

If Germany had to compete against France in economic performance, it would be loose. In terms of economic growth, Paris will surpass Berlin both this year and next, the World Bank predicts. The Paris’ stock exchange outperforms Frankfurt’s on an annual basis. Germans are even weakening in the discipline in which they traditionally excel: French exports grew faster than German exports last year.

A series of poor macro-economic data has highlighted Germany’s problems. There was zero economic growth in the first quarter, following a contraction in the last quarter of last year. Recently it emerged that industrial production has contracted twice as much as expected in March, feeling fears that zero growth will be revised negatively and Germany plunge into recession.

This week’s review by the OECD says: “The German economy has structural weaknesses’. Dependence on imported energy by stopping nuclear plants (an overnight decision by then Bundeskanzlerin Angela Merkel) and now boycotting Russian energy deliveries. Further the rapid aging of the population, with exacerbate shortages on the labour market. The heavy dependence on export-oriented industrial production was an asset in times of increasing globalisation, but is now becoming the Achilles’ heel of the German economic model.

The close economic relations between German and China are a particular point of concern. For instance, Volkswagen (with China as largest sales market) reported that export to China fell by 15 percent. It seems of no interest for Germany’s Foreign Minister Annalena Baerbock. Repeatedly she is clashing with her Chinese counterpart Qin Gang. This week about eight Chinese companies added to a draft for the next EU sanctions list. These companies are seen as having circumvented EU’s sanctions against Russia’s procurement of dual-use goods including microchips. Qin’s reaction: Don’t you dare sanction Chinese companies over their potential role in assisting Russia’.

Beijing also cancelled the visit by German Finance Minister Christian Lindner to the country this week at the last minute.

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