Germany Has, for All Intents and Purposes, Committed Itself to An Economic Implosion Due to Its Failed Energiewende

Doug Sheridan analyzes the fall of Germany due to its Energiewende, European peer pressure and a nasty case of the green virtual signalling syndrome:

The FT writes, Germany, Europe’s largest economy, is stuck in its fourth year of stagnation. Six months after Friedrich Merz took office, “the crisis in German engineering is gaining momentum at force”, says Dirk Pfitzer at Porsche Consulting. It’s “very clear” the slump is not cyclical and “won’t just disappear” in the next upswing.

Industrial production sits at the 2005 level even after a partial rebound in Sept. “Many of Germany’s economic core strengths have turned into vulnerabilities,” says Marcus Berret of Roland Berger. Those include a large industrial base that’s hard to decarbonise, a high dependence on exports, and a mighty auto industry having to write off 140 years of internal combustion engine expertise.

Meanwhile, Trump tariffs have hit German exporters hard. Over the first nine months of the year, their US exports plunged by 7.4%. But the prospects in China are if anything even bleaker, creatinga “China shock” that is now biting into the bottom lines of globally successful German companies.

In addition, for about two decades up to the pandemic, Chinese demand for German engineering goods and cars was seemingly insatiable, fueling the Merkel-era growth in corporate profits, employment and economic activity. Since the pandemic, however, China is “increasingly beating Germany at its own game”, says Spyros Andreopoulos of Thin Ice Macroeconomics.

Germany is now running a trade deficit in capital goods with China over a rolling 12-month period—a first since records began in 2008. Chinese machinery exports to Europe roughly doubled to around €40bn in over six years and may reach €50bn this year.

While German premium car brands like AUDI AG, Porsche AG and Mercedes-Benz AG were the first to feel the pain, capital goods makers have started to get similarly pounded. “As a country, the Chinese have been in the last years much better, more proactive, more consistent in going after the big technologies and conquering them,” said Klaus Rosenfeld, CEO of Schaeffer.

Oliver Richtberg of VDMA is sceptical of improvement. “Do we really have other sectors that can pick up the slack?” he asks. Domestic politicians have not yet internalized just how bad things are, he adds. “There’s still a lingering public perception that we enjoy high margins and a strong competitive position. But we no longer have those margins.”

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