Pitiful Germany

Germany is now heading toward early elections. Chancellor Scholz has lost the confidence vote in Parliament, signaling the end of the coalition that had already collapsed on November 6.

The main issue? In short, the budget, and especially the famous “debt brake” that was enshrined in the German constitution under Merkel. The federal budget is legally limited to 0.35% of the country’s GDP, and the 16 federal states are prohibited from taking on any new debt.

Germany now finds itself in a paradoxical situation where it never took advantage of negative interest rates—despite them lasting for years—to invest. The debt brake has consistently led to underinvestment in infrastructure, with the justification being the protection of younger generations, who now find themselves with one of the worst internet connections in Europe.

For many years, Germany exerted intense pressure on other EU countries to adopt its economic model, striving to make them resemble its own.

Ultimately, Germany seems to be heading toward a critical situation as decades of austerity have left it with an economy that has contracted by 5% compared to its pre-pandemic trend. After betting everything on diesel and its prestigious but now outdated industries, the decline in competitiveness will cost each family €2,500 per year (according to Bloomberg). Angela Merkel may well have conveniently resurfaced in her recent autobiography, Freedom, to suggest reconsidering the debt brake, but Germany is still destined for stagnation or regression. Decades of negligence, greed, mistreatment of workers through “mini-jobs,” and strategically biased choices driven by short-term financial gain and budgetary fetishism will be hard to overcome.

Deutsche Bahn and its rail network are the quintessential symbols of the hellish state of train travel in Germany today. Fans and supporters of EURO 2024 were shocked to discover that delays of 30 to 45 minutes were the norm. A German friend recently told me that “the chaos of the German railway is a national disgrace; everything needs to be modernized, changed, or thrown away.” Over the past 20 years, Germany has invested less per capita in its rail network than any other European country. Worse, it has reduced its network from 40,000 km to 34,000 km in a misguided attempt to privatize Deutsche Bahn and attract potential investors.

German economists, with their impeccable orthodoxy, and politicians devoted to their rigid ordoliberalism, may take pride in their surpluses and fiscal discipline. However, it’s far easier to present balanced budgets as a way to “protect future generations” than to account for the real damage their stubbornness has caused to these very generations.

Nonetheless, Germans have their own pace, their own blocks, and their own inertia. Half of Germans still believe that the poverty and mass unemployment of the early 1930s were the result of the hyperinflation that had hit the country a decade earlier. Fewer than 1 in 25 Germans are aware of the truth: it was deflation, not inflation, that caused their economic woes.