The German economy lags behind in Europe

Germany saw its expectations of a strong economic rebound in 2021 frustrated, due to the shortage of industrial inputs and the endless global health crisis, which risk prolonging into 2022.

The government had to revise its forecasts downwards and now estimates that the rebound will be 2.6%, after having contracted 4.9% in 2020, the first year of the coronavirus pandemic.

An almost humiliating figure compared to the 5% growth expected in the EU as a whole, according to the latest projections from the European Commission, which anticipate an expansion of 6.5% in France and 6.2% in Italy.

This situation complicates the life of the government coalition led by the Social Democrat Olaf Scholz, who came to power in December with a list of important projects for which financing will have to be found.

“2021 has been very disappointing for Germany”, declared the economist Carsten Brzeski, of the ING bank.

A disappointment that is explained by the supply problems of raw materials and components, to which a new wave of the COVID-19 pandemic was added at the end of the year, with its omicron variant.

Shortage

The health crisis hit the service sector hard, where “reserves are getting smaller, profits are falling and investments are slowing down”, summed up the German Economy Minister Robert Habeck on Thursday.

Industry, the engine of the German economy, was in turn hit by the shortage of raw materials and inputs, which shows no sign of ending.

In December, 82% of the companies questioned by the IFO institute indicated hardships.

The strategic automotive industry registers a strong unsatisfied demand for semiconductors, essential for the manufacture of cars.

The purchase of new vehicles fell by 10.1% in 2021 compared to the already historically depressed 2020.

And no short-term reversal is expected. “We have to be clear: the semiconductor crisis is far from overStefan Hartung, chief executive of auto equipment maker Bosch, recently told Focus magazine.

Those shortages are the fuel for record inflation, also fueled by soaring energy prices, which is affecting the mood of consumers already hit by the pandemic.

Multi-million dollar investments

The unenthusiastic situation could reduce the room for maneuver of the government coalition, made up of social democrats, environmentalists and liberals, when it comes to obtaining the multimillion-dollar investments it needs to modernize the economy, with more “green” productions.

Despite everything, the government approved at the end of the year an extension of 60.00 million euros in the 2021 budget, for projects related to the fight against climate change.

And it foresees a progressive restoration of the situation, which according to the Bundesbank should start in “the next spring” boreal.

The IFO institute forecasts a growth of 3.7% in 2022.

“When ómicron has passed and the supply problems have been resolved, the German economy will once again be the locomotive of the euro zone”, assures Carsten Brzeski, from ING.

Robert Habeck, the first ecologist in charge of a superministry of Industry and Climate, intends to change the perception that GDP is the determining factor in economic policy.

Habeck expects the inclusion of other criteria as keys to success, such as “resource preservation” natural and “climate protection”, according to the weekly Spiegel.