Germany's economy on the brink: Is there a threat of a crisis like under Trump?

Germany's economy on the brink: Is there a threat of a crisis like under Trump?

The German Institute for Economic Affairs (DIW) is approaching a significant milestone: it will be 100 years old next July. President Marcel Fratzscher underlines the institute's central motivation to analyze economic data in order to develop a better understanding of economic policy. However, in view of the current global and economic challenges, Fratzscher warns of an impending “mental depression” that could block necessary solutions.

In his analysis, Fratzscher speaks of one of the most difficult situations the German economy has found itself in in recent decades. He predicts the situation may worsen before concrete action is taken. In the next decade, Germany could face crises that are geopolitical, economic, technological or climatic in nature. This assessment is complemented by a commentary from DIW, which points out that companies are concerned about the uncertainties of the new year and express a desire for greater national sovereignty in order to regain control over economic challenges.

Globalization and its challenges

Fratzscher notes that the German economy is heavily dependent on globalization. However, globalization has worked beyond its borders, leading to a push for “smarter design”. This should particularly include disadvantaged social groups. This contrasts with increasing demands for de-globalization, which are becoming increasingly important in the current discussion about the relocation of production. Critics fear that such a relocation could reduce productivity and negatively impact competitiveness and wages.

The deindustrialization highlighted by Fratzscher is seen as a serious challenge, but he also emphasizes the prospect of new opportunities that can arise from change. Nevertheless, the politics of dealing with refugees must be reconsidered, as difficult conditions are counterproductive to general prosperity.

Resilience as the key for the future

As part of the discussion about Germany's future viability, improving the resilience of economies and companies is crucial. Smart diversification of risks and more globally diverse production structures are considered essential. Reference is also made to the geopolitical conflicts with countries such as China and Russia, which further exacerbate the challenges. The DIW's commentary emphasizes that in an increasingly globalized economy, sovereignty can only be realized as shared sovereignty.

Fratzscher calls for greater integration in Europe and a reformed competition policy in order to assert interests in global competition. The need to take a leadership position in future areas such as artificial intelligence, medical technology and ecological transformation is considered urgent. Nevertheless, the question remains whether the dream of technological independence from major players such as China and the USA is realistic.

Looking at the challenges ahead and the need to adapt economic policy, it is clear that Germany is in a critical phase. The coming months will show whether the necessary measures will be taken to avoid a situation similar to that in the USA under Donald Trump. In this context, the DIW has taken on an advisory and warning role in socio-political debates in order to create transparency and highlight blind spots.

For further information about developments in the German economy and the role of DIW, please visit the articles on fr.de and diw.de.