Germany accounts for nearly 30% of a monetary union consisting of 19 European economies. That’s how dangerous it is to see the world’s fourth-largest economy stuck in a virtually stagnant quarterly pace during the 12 months to March.
And here’s more: Measured at annual rates, the German economy at the beginning of this year was moving along at less than half the capacity of its potential and non-inflationary growth rate — a monumental waste of the country’s human and physical capital.
The German business community is blaming the government for high corporate taxes (31% compared with a European average of 22%), high energy costs, inadequate digital infrastructure, lack of high-speed fiber optic connections in most of the country’s industrial parks, unclear economic and political orientations, and more.
At their meeting earlier this month, the members of a powerful Federation of German Industries (Bundesverband der Deutschen Industrie – BDI) voiced their declining confidence in government policies at a time when they were facing increasing pressures from Chinese and American competitors. That’s what they told an uneasy audience of 1,500 people, headed by German Chancellor Angela Merkel and her economic and finance ministers.
German businesses wanted no “national champions” and bureaucratic meddling. They asked for effective economic and financial policies to support small- and medium-sized companies — the country’s celebrated Mittelstand — that represent 99% of German companies, generate about three-quarters of all jobs, and account for more than half of the nation’s GDP.
They probably knew they were asking far too much of a moribund governing coalition, trashed in recent European parliamentary elections and facing a certain demise if the wishes of 52% of German voters were met for new national elections.