German manufacturing is grappling with a profound structural crisis, casting a significant shadow over the nation's economic performance. A Commerzbank economist warns that unless clarity emerges soon regarding the government's economic strategies, businesses may be compelled to relocate operations internationally. This concern is supported by the S&P Global Purchasing Managers' Index and the Ifo Business Confidence Survey, both highlighting a downturn in Germany's manufacturing sector, which once symbolized the country's robust economic growth.
Despite this, economists dismiss ideas of an economic catastrophe, though they acknowledge that Germany, the largest economy in the Eurozone, is experiencing stagnation. Many economists maintain that Germany remains the economic backbone of the single currency area and Europe. Commerzbank's Chief Economist, Jörg Krämer, noted a significant number of companies surveyed by the Ifo Institute express pessimism about both their present and future business prospects.
"Manufacturing is undergoing a severe structural crisis, particularly impacting automakers, their suppliers, and energy-intensive industries like chemicals," Krämer remarked.
These sectors are struggling not only with tepid demand from China and relatively high energy costs but also with the erosion of Germany's competitiveness, which began during Merkel's tenure and has persisted under the current coalition.
"If the upcoming general election on February 23rd fails to prompt a shift in economic policy—an unlikely scenario with the current political climate—an increasing number of enterprises may relocate production to Eastern Europe or the United States," Krämer added.
The current manufacturing downturn is expected to hinder any substantial impact of the European Central Bank's declining interest rates on GDP growth from the spring onwards, according to the economist.
Commerzbank projects a modest GDP growth of only 0.2 percent for 2025.
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