There is no German miracle

There is no German miracle

March 14, 2015 0 By Michel Santi

Lost Germany

German politicians live and evolve in a parallel universe. Their trade surpluses, their fiscal and restrictive fiscal policies and their anemic domestic investment are all compelling evidence of the “economic autism” of their government elites. Those political leaders incessantly affirm in public the validity of these surpluses as if trying to convince themselves that these policies are healthy. The majority of the German written news media uses a radical and populist prose and encourages its readers to adopt an isolationist stance versus the rest of Europe. It sometimes goes as far as to promote hatred of all things non-German.

However, this German intransigence and isolationism hide a deplorably weak internal situation. And Germany’s leaders show a complete lack of vision and ambition to correct her economic weaknesses. They boast about their budget surpluses while neglecting to implement critical structural reforms.

German productivity, which decreased by 60% between 2005 and 2014, is melting away. Germany’s GDP growth is built on foundations of incredible fragility, which might collapse at any moment. Her economic growth is entirely dependent on the creation of precarious employment, low wages and a non-productive labor force. I find the arrogant German posture of prescribing structural reforms to other European countries comical and pathetic since her own economic model harks back to the Gerhard Schröder era.

It is obvious to me that the German government authorities as well as almost all economists in that country are in full denial of the facts and do not hesitate to interpret their economic statistics to fit their dogmatic views. But the numbers do not lie. Public investment in Germany is the second lowest of all OECD countries. As an example, 40% of their bridges are in desperate need of repair. Should we perhaps forgive this German attitude on the pretext that her citizens are ignorant of the inevitable demographic cataclysm that awaits them? Because not only is Germany aging, but is also doomed to suffer a significant erosion of its population size. Her population of 80 million today will shrink to no more than 65 million in 2060, well below the French population at the same time. And in 2060 35% of Germans will be over 65 years old.

Germany’s destiny has already been decided. Her future economic growth will obviously decline at the same time as her population. At present, in 2015, Germany still refuses to facilitate the access of her women to the labor market or to expedite the immigration process for those willing to work there. Germany today has no margin for error. Therefore, the “German way” is a future problem to the rest of the world and not a solution.