Germany’s weak economy has strong foundations

Happy Sunday, Readers.

The German elections are just two weeks. The clouds have been condensed by the largest economy in Europe. Determinating energy expenses from Ukraine after the invasion of Ukraine, the growth of competition from China and now the threat of US tariffs has increased economic activity. Germany has recording negative growth in two direct years. The nation regrets its badge as “a sick man in Europe.”

It makes Germany a perfect free dinner for Sunday Reporting Analysis. This week I studied the long-term optimistic business of the German economy. Here is what I found.

First of all, the German Industrial Decline reports are exaggerated. German production is, in fact, surprisingly resistant and agile.

Energy crisis and supply chain failure, forever 19 epidemiological percussion German industry. Energy-intensive industries such as chemicals and metals. But, IMF NOTESOther areas that are adapted to “Transfer of products added to higher value and using less intermediate entries.” In 2023, exports of electric vehicles increased by 60%. Electronic and optical products have also been selected, as well as aircraft cars.

The table below shows that although German production has decreased, the value added is stable.

Indeed, Germany’s long expertise in engineering can be transformed into new growth (home and abroad). And although the export of the United States and China may influence the increase of the tension in Armenia, the people continue to be the dominant industrial force in Europe.

The demand for protection equipment and green technology is growing on the continent. Germany has a special, leading Europe, Green Tech (and general) licenses in the country. It also ranks above the advantage of the developed peoples, the United States and China in the IMF. This includes high efficient power plants, smart network design and Charging technologyA number

Next, the enormous strength of the German industry is emphasized by the presentation of the stock market. Despite the gloomy story around his economy, Ducks exceeded all other major indicators, including S & P 500 last year.

Is FT reported In December, the power of Daxy was based on German’s own seven: SAP, Siemens, Siemens Energy, Allianz, Deutsche Telekom, Rheinmetall and Munich Re. Their focus on global markets isolated them from domestic economic weakness.

Although the market focus is on concern, these companies are spread in energy, telecommunications and insurance, unlike the S & P 500, which has shown the last instability for artificial intelligence-based corrections.

If these companies remain strong, there is an attractive opportunity for investors. Goldman Sachs notes that the common market in the German Joint Stock market is a historic discount to the United States, even when it is adjusted for the composition of the sector.

But the German corporate force extends beyond these large groups. Its industry is dominated by Mittelstand. These small and medium-sized private enterprises, unlike small companies in the United States and the United Kingdom, are more professional and innovative, and often refer to “hidden champions.”

These include a coffinial technology (which makes spinning devices in space). Ill (sensor manufacturer); Kaefer Isoliertechnik (which makes isolation technology); and König & Meyer (Music Pavilion Manufacturer).

The table below shows that the German industry is well installed for the creation of the value, being very competitive in a number of growth areas. (REsearchers: In BCG and the German Economic Institute developed a classification methodology with the competitiveness and global appeal, such as the share of the global market, the number of patents, the market growth and technological growth.)

The German industry generates significant incomes by selling goods and services abroad, which implies demand and geopolitics changes.

But there are opportunities to sell more to Europe, especially in protection and green technology (particularly as trading wars, and the United States is pushed from the agenda of renewable materials). The domestic economic environment can also provide a headband in the medium term.

The German elections are an opportunity to update. The next Next Chancellor, the leader of the Christian Democratic Union Friedrich Merz, is expected to be offered with some structural reforms. However, coalition policy could dilute many of its programs.

Whatever the composition of the German government is still a half full prospect of the glass, even the border improvements of politics can promote the growth of productivity (and support industrial mobility).

First of all, the “Debt Brake” is defined by the structural deficit by 0.35% of GDP, unnecessarily maintains state investments. The share of capital expenditures in the German economy is one of the lowest OECD.

More than half Germans’ support for overestimation of borrowing borders. Indeed, the debt brake means that the country has a fiscal place for its traveling road, railway and equivalent investments on effective investments.

Public investment so low, even a small weakening of the debt brake will make a noticeable difference (:Ratings: Offer that Germany can bring an additional 48 billion euros or about 1.2 percent of GDP, without the EU’s fiscal rules.

There is lower suspended fruits. Recently, the allowable reforms were fired with a Prompt construction Highlighting high revenues in renewable materials to cut the bureaucracy. Really, it takes 120 days To get a business license (more than double OECD average), according to the IMF. The digitalization of the government is also following. For example, fair 43 per cent Services in advance personal data on online forms compared to average 68 percent.

There are political obstacles to lift investments and redress the red ribbon. Productivity profit will take time. But even the increase in low base growth will increase growth.

A sticky point is immigrant. The working age population is rapidly shrinking, and Germany suffers from a number of skills shortages. If migration remains politically pregnant, then recycling initiatives are needed. The country still generates directions in robotics, which can help free employees for higher costs.

The last economic performance of Germany was undeniably overwhelming. Unlikely to turn around soon. But its industrial falling story is overlooking. Downbeat headings hide the strengths of the nation in production and innovation.

Germany AG (and GmbH) has an expert examination in the growing areas, including green technology, protection and leading production. The political lesson also woke up about the dependence on the old economic model. This gives hope that Germany once could swim creative destruction, in particular, if politicians can play a coefficient.

Send thoughts to me Freelchung@ft.com or in x @ Teapperikh90A number

Food for mind

Improving artificial intelligence, people need to think about their comparative advantage over knowledgeable cars. This study It is engraved in individual properties, most likely, the outbound technological change and economic income.