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Germany, the German model no longer works: between recession and populism, this is why it risks becoming the great sick person of Europe

GDP down in 2023, auto industry in severe pain, Bayer in crisis and struggling with cuts. An aspirin will not be enough to cure the country. And an economy that struggles to grow fuels social conflicts: a threat at the heart of the EU

Germany, the German model no longer works: between recession and populism, this is why it risks becoming the great sick person of Europe

An aspirin is not enough to cure what risks becoming the great invalid of Europe: the economy of great Germany, now afflicted by ailments that cannot be defined as temporary. First of all, the GDP, which fell to a recession zone of -2023% in 0,3, the last act of a long negative streak: according to estimates from the International Monetary Fund, last year the German economy was at the bottom of the list among the most developed countries And it's not an isolated fact. Since 2019, GDP has grown by a modest 0,7% compared to 4% in the European Union, 7,5% in the USA and 20% in China.

Germany and the Bayer crisis

No, faced with these numbers we need more than an aspirin, already proud of Bayer, today grappling with a serious crisis. These days CEO Bill Anderson is preparing to present a new restructuring plan, probably more severe than the 2018 plan which already included cutting more than 10% of jobs. Now the size could be even larger, as is feared in employee circles. Bayer has 22 employees here and just over 100 worldwide.

The Bayer case, crippled by the unfortunate merger with Monsanto and by some industrial errors, is however a good summary of the mistakes committed in the name of rigid governance. Starting now, the staff cuts should take place "by the end of 2025", particularly affecting "the middle levels of the administration". For Bayer the goal is to grow a "faster and more innovative" company. With the contribution of the union which has promised collaboration as long as the group is not undermined, keeping both the chemical/pharmaceutical and agricultural activities alive.

Germany between energy costs and declining appeal

But it is precisely traditional German co-management that seems to be in crisis. The industrial system is unable to compensate for the higher energy costs or the drop inappeal of made in Germany. The decline is felt above all in the manufacturing industry, already a strong point in the system: in 2023 turnover fell by 2% overall, due to the decline in the energy industry. The chemical and steel industries are suffering with a turnover 20% lower than in 2021. And the prospect of a change of direction in the production mix of Made in Germany is gaining ground, hit by the loss of low-cost Russian energy and the contraction in exports .

Germany, the auto industry is suffering

It is the one who suffers the most the car industry, the flagship of German technology, crippled by the transition to electric which favored Chinese and US companies. And so production is 25% lower than the average level recorded in the XNUMXs.

And the scenario could get worse, because the crisis in the Red Sea risks producing new bottlenecks in supply chains, penalizing the trade of components.

The rumors about the possibility are not surprising at this point change of direction on electric. The European People's Party (EPP) reportedly intends to abandon the phase-out plans of the combustion engine from European cars by 2035. An unprecedented turnaround destined to change the strategies of a leading sector, as has never happened in the long history of motors. This also introduces a sense of uncertainty in the short term.

The result? “The economy is struggling to grow and this favors social conflicts,” he comments Ulrich Kater, chief economist at DekaBank. In addition to the growth of the far right of the AfD which now closely undermines traditional political forces. As a parable, the president of the chemists' union, Michail Vassiliadis, wanted to recall, before the congress, the history of Berlin's Inselstrasse, the historic headquarters of the Allgemeine Deutsche Gewerkschaftsbund. “On May 2, 1933 – he recalled – the Nazis invaded this room and kidnapped the union secretary. Today these enemies of freedom are back in action."

An eloquent way to underline the risks that the growth of populism entails for the socio-economic balance in the heart of Europe. A discomfort that for now is not intercepted by the traditional austerity of the central political bloc beyond the Rhine, starting with the Bundesbank. But it threatens to explode soon.

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