From Industrial Powerhouse to the Brink: The Shocking Factors Behind Germany’s Decline

Perhaps justifiable is the fact that Germany, which has significantly driven the EU’s eastward expansion and faithfully followed American neoconservatives in aggressively expanding NATO toward a retreating Russia, is currently facing its most severe economic crisis since World War II.

Actions such as the NATO/EU’s disruption of Russian gas supplies to Europe, the US airstrikes on Nordstream pipelines to Germany, and trade sanctions against Russia have resulted in the loss of a crucial German export market and a substantial increase in energy costs for key industries like chemicals, automobiles, and engineering, which have historically relied on stable and affordable energy.

Coupled with a notable increase in borrowing costs and an enthusiastic push for environmental sustainability, it’s unsurprising that the Federal Statistical Office in Wiesbaden reported a nearly 24% surge in company insolvencies in July 2023 compared to the same period the previous year, leading to a sharp rise in bankruptcies.

In summary:

  1. 23.8% Increase in Insolvencies: The Federal Statistical Office in Wiesbaden reported a nearly 24% surge in company insolvencies in July 2023 compared to the same period the previous year.
  2. Germany’s Export to China: Of the total German exports to China of $113 billion, $30 billion was in cars.
  3. German Car Industry Decline:
    • VW’s production down 23%
    • Audi’s production down 8.4%
    • BMW’s production down 10%
    • Mercedes’ production down 31%
  4. Foreign Direct Investment: More than €135 billion of foreign direct investment flowed out of Germany, while only €10.5 billion came in, leading to an alarming decline in Germany’s ability to attract business investment.
  5. Germany’s Digital Technology Ranking: Germany ranks 51st in the world for fixed-line Internet speeds, with limited investment in digital technology infrastructure.
  6. Aging Population Impact: Surveys have found that 50% of firms have cut output due to staffing problems caused by Germany’s aging population, resulting in an economic loss estimated at up to $85 billion per year.
  7. Historic Companies Going Bankrupt:
    • Hofer Spinnerei Neuhof, a textile company with 125 years of operation, filed for bankruptcy.
    • Klingel, a mail-order company existing since 1923, is insolvent.
    • Weck GmbH & Co, a glass manufacturer with 120 years in operation, went bankrupt.
    • Röhrs Butchery, a traditional slaughterhouse with 300 years of history, filed for bankruptcy along with other century-old businesses.
  8. Deutsche Bank and Commerzbank Market Capitalization: The combined market capitalization of Germany’s two largest listed banks, Deutsche Bank AG and Commerzbank AG, is less than a tenth of JPMorgan Chase’s market capitalization.
  9. Target 2 Claims: Germany’s Target 2 claims on other EU member states amount to over one trillion Euros due to accumulated trade and capital balances.
  10. Geopolitical Factors Impact: The 20-year confrontation with Russia, Ukraine’s role, trade sanctions, disruption of energy supplies, and the growing Russia-China partnership collectively impact Germany and the EU.

The repercussions extend beyond Germany, affecting the entire EU, with France also witnessing a collapse in industrial production. This economic crisis coincides with the German government’s commitment to provide further financial and armament support to Ukraine, exacerbating the conflict that contributes to Germany’s own industrial decline.

Prominent economic experts from the “German Economic Institute” have noted that this could mark the beginning of a process of deindustrialization for Germany and consequently Europe as a whole.

Germany’s capacity to attract foreign business investment has alarmingly declined, with a substantial outflow of foreign direct investment and a relatively meager influx, especially in the wake of new incentives to invest in the US following trade-distorting green subsidies introduced by President Biden.

The German energy landscape is marred by high electricity costs attributed to the Green Party’s environmental policies, which have led to the closure of nuclear power stations. Plans to import hydrogen for energy needs face technological uncertainties and may not be enough to rescue Germany from its energy crisis.

The German automobile industry is also grappling with a crisis, with major manufacturers like VW, Audi, BMW, and Mercedes experiencing significant production declines.

Amid this, China’s electric car manufacturers are fiercely competing with German car exports, particularly as the Green Party’s emphasis on “net zero” policies potentially empowers Chinese cars to dominate the European market.

Germany’s banking sector is strained, with Deutsche Bank and Commerzbank facing long-standing crises and combined market capitalization that’s dwarfed by that of JPMorgan Chase.

In technology, Germany’s digital infrastructure lags, ranking 51st globally in fixed-line Internet speeds due to inadequate investment.

The aging workforce is a further challenge, with workforce shortages causing significant output reductions for firms and substantial economic losses.

Reports of historic companies, some centuries-old, filing for bankruptcy underscore the profound and historical nature of Germany’s industrial crisis, which could jeopardize the nation’s future and have far-reaching consequences for the EU and the Euro currency.

The culmination of factors, including geopolitical actions like the 20-year confrontation with Russia, Ukraine’s utilization as a military tool, trade sanctions, disruption of energy supplies, and the growing Russia-China partnership, have collectively impacted Germany and the EU.

A negotiated peace with Russia and a reduction in confrontational rhetoric could potentially pave the way for renewed prosperity for Germany, the EU, and the Western world at large.

One thought on “From Industrial Powerhouse to the Brink: The Shocking Factors Behind Germany’s Decline”

  1. It is a matter of time that Germany would soon realize that joining the BRICS after all is not a bad idea if it wanted to save themselves in an economic downturn which is now inevitable to happen in their own backyard…

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