Joachim Nagel, the President of the Bundesbank and member of the European Central Bank's governing committee, stated on Wednesday that Germany is not the sick man of Europe, but he also acknowledged that the economic situation in Germany this year is indeed not very good.
On the same day, at the International Monetary Fund and World Bank's autumn 2023 annual meeting, Nagel pointed out that we should not compare Germany's current economic situation with the previous period known as the 'sick man of Europe'.
Analysts first referred to Germany as the sick man of Europe in 1998, when Germany was dealing with the economic difficulties of reunification. Now, the German economy is once again facing difficulties and may become the only large economy to experience a contraction in 2023.
Nagel stated that compared to more than 20 years ago, this is a completely different situation. Germany needs to carry out some structural reforms, but if you take the labor market as an example, we still operate the economy more or less on the basis of full employment
He added, "I believe everyone understands what we need to do, but we are not the sick men of Europe
According to the International Monetary Fund's forecast, the German economy will contract by 0.3% in 2023, making it the worst performing major economy among all major economies. Multiple media outlets have called Germany the "sick man of Europe", which has sounded a warning to the German government.
Nagel stated that the situation this year is indeed not very good, but the economy will resume growth next year. The German central bank predicts that the German economy will grow by 1.2% next year, far higher than the 0.3% contraction in 2023.
On Tuesday, the International Monetary Fund lowered its global growth forecast for next year, predicting that the world economy will grow by 3% this year, in line with July's forecast; However, it is expected that the global economic growth rate will be 2.9% in 2024, which is 0.1 percentage points lower than the forecast in July. And it is expected that the German economy will continue to be weak, with a growth rate of 0.9% in 2024, lagging behind the average level of 1.2% in the entire eurozone.
According to the data of the Federal Statistical Office of Germany, the price increase in Germany slowed down more than expected in September, with a year-on-year growth of 4.3%, which is the lowest monthly data since the Russia-Ukraine conflict.
Nagel claims that inflation is moving in the right direction, and this beast (inflation) is still there, but to some extent, we have tamed it.
In addition, German Chancellor Schultz also refuted this claim last month. Schultz acknowledged that the German economy is weakening, but emphasized that Germany is not yet called the sick man of Europe.
Schultz said that affected by the Russia-Ukraine conflict, Germany was hit hard by high inflation and rising energy prices. Nevertheless, he stated that the German government is making every effort to revitalize the national economy and placing heavy bets on renewable energy.
According to an article released by the Kiel Institute of World Economics in Germany, if Germany does not want to become the sick man of Europe again, it must bravely turn to future growth industries, rather than timidly spending billions of dollars to maintain the energy consuming industries of the past. All digital fields have experienced incredible backwardness, significant decline in government capacity, and aging public infrastructure. At the same time, there is a lack of effective strategies to address housing shortages and increase immigration to address the impact of an aging workforce