Fri. Feb 23rd, 2024

Analysis | Germany doubts itself< /p>Open in full screen mode

Farmers demonstrate with their tractors near the Brandenburg Gate in Berlin.

  • François Brousseau (View profile)François Brousseau

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In the grip of a social, economic and political crisis, Germany doubts itself. With angry farmers in the heart of Berlin, and a strong image: a row of tractors facing the Brandenburg Gate. And as a bonus: a national strike of railway workers, announced this Wednesday, January 10, which could paralyze rail transport.

All against a backdrop of economic gloom, with poor foreign trade figures published at the beginning of the same week.

Is the famous German economic model running out of steam?

It seems like. Germany, Europe's economic superpower, the largest exporter of chemicals, pharmaceuticals, cars and machine tools, is struggling with its productive model and its social model, based on continuous consultation between bosses and unions. (hard to imagine in France or Quebec), but which no longer works as before.

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Germany is also struggling with its political stability. During the last two general elections, in 2017 and 2021, the parties (which have multiplied, there are now six in the Bundestag) took several months to find a viable coalition formula – at certain times, it almost seemed raw in Italy!

The unease is now spilling over into the streets occupied by a kind of yellow vest movement, a German and agricultural version. Several demonstrations this week, roadblocks in the countryside, but also in the heart of the capital, are testing the coalition government of Social Democratic Chancellor Olaf Scholz.

A bit like in the yellow vest movement in France in 2018-2019 (which did not represent agricultural regions, but rather peri-urban regions) these are the subsidies, or the end of subsidies, to energy prices – especially diesel – which are the spark plug of the protest movement.

Subsidies cut due to public budgetary problems: specifically, the end of the tax rebate on diesel used in tractors and agricultural machines.

Farmers are furious and shout that their profession is being killed.

At the same time, the railway workers joined in. They announced a three-day series of work stoppages on January 10. Between roadblocks and trains that no longer run, the German machine stops, or slows down. And Germany – especially the small middle class which considers itself downgraded – rich Germany is shouting today that it is sick.

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The railway workers' strike paralyzes transport in the country.

Official economic figures tend to confirm the malaise. For example, those of foreign trade, published at the beginning of January, indicate that over one year, from the end of 2022 to the end of 2023, exports – the spearhead and pride of the German economy – fell by 5%, and imports by 12%. These figures go hand in hand with stagnation in consumption and a decline in certain traditional industries.

And again, this decline took place in the context of a year of high inflation, which means that the quantity of goods and services sold abroad (at increased prices) fell by more than 5%: perhaps be more like 10%.

In 2023, the recession in Germany was -0.3%. The projections for 2024 are no better.

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Farmers demonstrate in Dresden.

Competition from China it hurts. But also, the decline of China as a former loyal client of Germany.

For cars, machine tools, metallurgy, the Chinese – consumers and businesses – have been, since the turn of the century, the major buyers of German products and services. But since the pandemic, this market has dried up.

Because of the Chinese industrial slowdown, which is significant, but also because, for example, in the electric car sector, the Germans are downright downgraded by Chinese manufacturers.

Diesel or gasoline Mercedes and Volkswagens are now becoming rarer on Chinese roads, as are Japanese Hondas and Toyotas. What replaces them? Millions of electric cars made in China!

This painful slowdown of the German machine has of course political effects, notably a weakening of the Party coalition social democrat with the liberals and Die Grünen (ecologists).

Weakening accentuated by a budgetary crisis itself fueled by the Constitutional Court.

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Chancellor Olaf Scholz at the weekly meeting of the government.

Because in Germany, this court also ensures the budgetary orthodoxy enshrined in the constitution. On November 15, it outright prohibited certain deficit public spending and the transfer of budgetary items to uses other than those which had been planned. Result: a hole of 60 billion euros compared to the last budget of the Scholz government! Even in rich Germany, this is not a negligible sum.

Political translation: the ruling coalition, which in 2021 had gathered around 52% of the votes cast, would now be worth only 35 or 38%, according to polls recent.

For whose benefit? For the benefit of the extremes of left and right and especially the xenophobic Alternative für Deutschland party. After obtaining 10% in the 2021 elections, this party now stands at 22% in opinion polls.

  • François Brousseau (View profile)François BrousseauFollow

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