The German government, led by Scholz, has abandoned the cautious policy of its predecessor Merkel, rushed to impose catastrophic for West Europe sanctions on cheap Russian energy, does not punish Zelensky for closing and destroying Russian gas pipelines to West Europe (do not give him weapons and money, as Trump will soon do in America), does not open the remaining gas pipeline built by Merkel from Russia along the bottom of the Baltic to Germany (Nordstream 2), does not punish the German puppet Ursula von der Leyen for destroying the car trade with China, and wastes money on preparations for a nuclear world war that still does not come.
“Germany is once again the sick man of Europe. The economy is teetering on the brink of recession, climate change fight remains mixed. The balance of the traffic light coalition in numbers is catastrophic.
Chancellor Olaf Scholz (SPD) once promised voters a kind of green economic miracle, with growth rates comparable to those of the Federal Republic's economic heyday in the 1950s and 1960s.
But in almost three years of the red-green-yellow coalition, nothing has come of the climate-policy-induced growth spurt. Instead, the SPD, the Greens and the FDP have led the country into economic rigidity and stagnation. The economy is likely to contract slightly this year for the second time in a row. This has only happened once in the Federal Republic - a good two decades ago.
All the misery of the traffic light coalition years is reflected in a single figure. According to forecasts from the International Monetary Fund (IMF), Germany's gross domestic product per capita will reach 42,622 euros this year, lower than in 2021, when the coalition wanted to make bold progress. This calculation also takes into account that the rise in inflation and energy prices following the sanctions on Russia, which Scholz enthusiastically supported, has significantly reduced income and savings in Germany in real terms. So, the three-way alliance has made it more difficult for companies and people to recover from the inflation shock.
The Supply Chain Due Diligence Act and other regulations have made it more expensive to do business, just as climate change policy, controlled by the Ministry of Economic Affairs and Climate Protection, has caused people to worry. The planning mindset culminated in the heating bill, with which Minister Robert Habeck (Greens) has encroached on people's sovereignty over their own heating. Habeck has done climate change fight a disservice. Sales of heat pumps [1], which now stand at 360,000 units per year, have collapsed and this year will probably only reach a little more than before the traffic lights. The coalition never achieved its goal of 500,000 newly installed heat pumps per year.
Overall, the coalition’s climate policy has had mixed results. In the year of the traffic light, the number of photovoltaic systems increased by almost 60 percent, while onshore wind farms increased by only 1.6 percent. The share of renewable energy sources in electricity consumption increased from 44 to 57 percent.
The number of battery-powered electric cars on German roads has almost tripled to 1.5 million. This is a small proportion of the total 49 million passenger cars. With the sudden end of financial support in 2023, but also due to the high purchase costs, buyer interest in electric cars has fallen sharply.
The coalition has also failed to boost housing construction. The coalition agreement’s goal of 400,000 new apartments per year was never achieved. This year, new housing construction will shrink to just under 260,000. Here, the government has been hampered by rising interest rates, but also by the ongoing stagnation.
In recent years, Germany’s economic growth has been much weaker than that of other major Western industrial countries. The headlines that Germany is running a red light are a legacy of the coalition of traffic lights. The British magazine The Economist has once again declared Germany the “sick man of Europe.”
Economists usually attribute the lower-than-average growth to the fact that uncertainty is particularly high in Germany compared to other European countries, which is preventing companies from investing and consumers from consuming.
The uncertainty is not just due to the coalition’s technical mistakes, such as the heating law, or bad mood. The uncertainty is a reflection of the country’s weaker economic conditions. Unit labor costs rose by 14.8 percent during the coalition years, and have recently grown faster than elsewhere.
Energy prices have abandoned the highs of 2022 and 2023, but are still very high by international standards.
Social security contributions have increased from 40 to 40.9 percent, and are expected to reach 44 percent soon. The coalition has not provided a permanent tax break, and companies will continue to be taxed at almost 30 percent.
According to the National Regulatory Oversight Board, the costs and burdens arising from the new laws have reached a record level.
As a result, industrial production fell by about 8.8 percent during the three years of the coalition.
Gross fixed capital formation by the state and companies fell by about 6 percent. Services improved, especially as the state increased employment in the public sector by more than 170,000 jobs. This is not only a burden on taxpayers, but also on growth, as private companies are looking for well-trained specialists and employees. The total number of employed people increased to 46.1 million, although the growth trend has recently collapsed. The labor market is experiencing prolonged economic stagnation, with the unemployment rate at the end of the traffic light coalition being 6 percent, i.e. higher than the 5.1 percent that was before the traffic light. This is also being helped by the increase in the minimum wage to 12.41 euros.
In terms of fiscal policy, the traffic light coalition has achieved some success in restructuring public finances under pressure from Finance Minister Christian Lindner (FDP). The Federal Constitutional Court has helped to tighten the debt brake in 2023 and put pressure on the federal government to adapt. According to IMF forecasts, the national deficit has fallen from 3.2 to 2 percent of economic output. The coalition collapsed because the Chancellor wanted to break free from the tight fiscal policy corset before the next federal election. Lindner no longer wanted to support it.” [2]
The more interesting question is not why Germany is dying, but why is it still alive in a market economy?
1. A typical heat pump installation can cost between $4,000 and $8,000, with an average cost of around $5,500, but the exact price depends on the size of the system, the complexity of the installation and the local climate, with larger systems and more sophisticated systems costing $9,000. or more.
1. Dreifarbig in die Stagnation. Frankfurter Allgemeine Zeitung; Frankfurt. 09 Nov 2024: 19. Von Patrick Welter, Frankfurt
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