Germany needs a new growth model

According to Sander Tordoir and Shahin Vallée from the Center For European Reform, Berlin should fundamentally reset its growth strategy, rather than clinging to a failing model of industrial export corporatism.

During the past decade, Germany’s export-driven economic model underpinned its strength on the European and international stage. The country accumulated a large external surplus and used its deep pockets to cement its status as a leading development aid donor, amplify its voice in the Bretton Woods institutions, and, albeit hesitantly, backstop the eurozone and its bailout funds. Europe’s largest economy has also proven to be more adaptable than previously thought and weathered the pandemic and the Russian gas cut-off better than widely anticipated.

But these shocks should not hide the fact that the German economic engine is facing structural headwinds that steadily weaken the country as geopolitical tensions mount.

(WBJ)