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  • Michael N.

Germany's Economic Challenges

Germany is currently the fourth largest economy in the world and the largest in the EU and Europe. Since its reunification, Germany has experienced significant uninterrupted growth and has been a driving force in Europe. However, at the moment, Germany is still facing economic challenges, including small reductions in its GDP size, while other countries have recovered from the war in Ukraine. While many blame the current government, the actual problem is that Germany was not prepared for economic crises and seems to have focused more on short-term gains rather than long-term sustainability.

For instance, in 2021, 55% of German gas imports came from Russia, which is higher than many, if not all, other European countries. The reason for this dependence was the low cost of Russian gas. Additionally, Germany has been much slower than countries like the UK or US in terms of digitalization and moving towards renewable energy sources. As a result, there are significant changes currently underway in Germany, highlighting poor long-term economic investments. A key strength of Germany is its manufacturing sector. From cars to chemicals, exports constitute 47% of the country's GDP. For comparison, in the UK, China, and India, this percentage ranges between 10 to 30%, and in the US, it is just over 10%. This dependence demonstrates how reliant Germany is on certain sectors. The largest age demographic in Germany is currently those in their late fifties and early sixties. This poses a significant weakness for Germany's exports, as these individuals will soon retire. By 2020, Germany is expected to lose 7 million workers, potentially diminishing its competitive advantage in terms of workforce size. The issue with Germany is its instability. One could imagine Germany standing on the edge of a platform, while other countries stand more securely in the middle. Once Germany is pushed, it risks falling more severely than other countries.

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