Germany muscled its way through the COVID-19 pandemic and managed to avoid a devastating industrial shutdown after Russia cut off its gas supplies. Still, it never fully allayed concerns that economic trouble might lie ahead. The past two weeks provided dramatic evidence that these fears were justified.
Elections in the Eastern German states of Thuringia and Saxony at the beginning of the month saw support for populist parties surge, dealing a fresh blow to the governing coalition in Berlin and creating further uncertainty over Germany’s ability to attract investment. Just a day later, Volkswagen AG, the country’s largest automaker, dropped the bombshell that it wanted to end a decades-old labor agreement and possibly close domestic factories because of lagging demand. Then, BMW cut its full-year earnings guidance and UniCredit SpA surprised investors with news that it had amassed a 9% stake in Commerzbank, catching the government off-guard.
“There is no point in sugar-coating: Germany keeps falling behind internationally,” Tanja Gönner, chairwoman of industry lobby group BDI, wrote in a report that urged immediate action to improve the country’s competitiveness and overhaul its industry-heavy economy. Germany’s transformation “will cost all of us - economy, politics and society - but no transformation would cost all of us a whole lot more,” the former lawmaker added. Economic headwinds had been intensifying for quite some time.
Germany’s manufacturing ind.