Sebastian Matthes is Editor-in-Chief of the Handelsblatt.
The German economy is currently experiencing several crises at once. There is the war in Ukraine, which overshadows everything, and Russia’s attack on a free country, which is causing turbulence on commodity markets worldwide, causing supply chains to break up and jeopardizing the energy supply of all of Europe. This week, the federal government called the “early warning level” of the gas emergency plan to prepare for a gas supply failure.
At the same time, the economists halved their growth forecast for 2022. It is not without reason that Handelsblatt chief economist Bert Rürup warns of a long phase of low growth rates and high inflation in Germany. Crisis management instead of departure, that is the new zeitgeist. And there are other underlying crises that will not simply disappear because the media mainly report on the Ukraine theater of war. First, there is the climate crisis, which the federal government wants to answer with a complete restructuring of the economy.
Second, there is the innovation crisis, the realization that the German economy is perfect at optimizing the breakthroughs of the past. However, it is struggling with the disruptions of the future, which is reflected in the small number of relevant technology companies in the Dax. And thirdly, the skilled workers crisis, which is slowing down growth across all sectors, is often overlooked because companies can hardly fill vacancies.
New growth concerns
All of this will cost growth over the next few years. But in the midst of these crises, we are witnessing a federal government that is trying to say goodbye to some of the lies of the past – such as the foreign policy maxim of “change through trade”. The Federal Chancellor even speaks of a “turning point in time”. However, Olaf Scholz prefers not to put the burden on the citizens that this inevitably entails.
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Instead, government rescue and support packages are needed – fuel vouchers, heating allowances, government loans. As much as the help is to be wished for those affected, chronic diseases cannot be cured with the billions in plasters provided by the state.
Independence from Russian energy supplies, the green restructuring of the economy, the energy transition – all of this should happen. But nobody should feel it. The big projects should not cost much more effort than a visit to Ikea. No one likes to talk about car-free Sundays or a temporary speed limit, and not really about extended operating times for nuclear power plants either.
The expansion figures for solar and wind power plants are pathetic anyway – despite all the big plans. This country has undertaken so much in the past few months and is still agonizingly slow to move forward.
Germany needs a very fundamental debate about where growth and innovation should come from in the coming years and decades. Even during the corona crisis, it was said that the country’s digital deficits had now become clear to everyone. Germany must reinvent itself. But instead of a revolution, new home office rules followed.
As the Ukraine War rages on, German 8th graders continue to memorize the rivers and mountains of Russia using printed worksheets, as if Google had never been invented. Universities often ignore the realities of the labor market. And if a highly successful start-up wants to complete a new round of financing, the founders still have to print out 24,000 pages of paper, as Getyourguide CEO Johannes Reck recently impressively showed on Twitter.
The common denominator
How can something new emerge in Germany? That is the central question. A strong stimulus would be a cut in corporate taxes, which would spur investment and innovation at a time when the economy is being weighed twice by high energy prices and the green transition. But the traffic light coalition will hardly agree on this, if only for ideological reasons. Perhaps the lowest common denominator would initially be a fundamental reform of the state and administration: faster approval procedures, simpler business start-ups, less bureaucracy. That would alleviate several of the acute crises. Apartments could be renovated more quickly and wind turbines could be set up more quickly. Companies can be set up more quickly, permits for new plants can be granted more quickly. Robert Habeck promised Tesla speed. So far, however, a lot has been going at the usual BER pace.
More: The slow motion turn of Olaf Scholz