Europe's Biggest Economy is in Trouble
04:12 Share

This message comes from Home Instead. Home Instead knows that if you leave home to seek aging care, you say goodbye to where you built your life. So why not stay with help from Home Instead? Learn more at HomeInstead.com. Home Instead. For a better what's next. Today on State of the World, Europe's biggest economy is in trouble.

You're listening to State of the World from NPR. We're the day's most vital international stories up close where they're happening. It's Wednesday, February 19th. I'm Greg Dixon. Germany has Europe's biggest economy, and it's not doing well. Too little investment, too much bureaucracy, and a war on European soil has led to stagnation for an economy that thrived during the boom years of globalization.

And the state of the German economy has been an issue that is front and center in their upcoming election. NPR's Berlin correspondent Rob Schmitz tells us more.

Robotic arms spin copper wiring faster than the eye can track it on a factory floor in the Bavarian city of Memmingen. Each year, this factory produces tens of millions of solenoids, electromagnets used in automotive and industrial machinery. But that's down 20% from just five years ago. Owner Albert Schultz remembers those days fondly. Germany has had a fantastic party now for 20 years.

Globalization, great for us. Everybody wanted our products. They were cheap thanks to the Euro. Energy supplies from Russia were cheap. And you Americans secured our military

Security, yes. Thanks for that. But these economic advantages that Germany enjoyed for years are on their way out. Globalization is in retreat. Chinese want to produce for themselves. Americans want to produce for themselves. The euro is still there, OK? We have to take care of our own military now, and the cheap energy supplies from Russia are gone as well. So this party has ended. Schultz says among European economies, Germany has profited the most from globalization in the past two decades. And

And that is why it's suffering the most from globalization's decline. Schultz says it's hurt his company, too. We have been in crisis mode for five or six years now. There's been no growth since 2019. And profits have gone constantly down, and currently there are no profits. Schultz is not alone. The whole of German industry has shed hundreds of thousands of jobs since the end of the pandemic and the start of Russia's war in Ukraine.

a topic that was center stage in the most recent debate between current Chancellor Olaf Scholz and his likely successor Friedrich Merz of the center-right Christian Democratic Union Party. Germany's been in a recession for three years in a row. That is unprecedented, exclaimed Merz in the debate. You claim deindustrialization is not happening, Mr. Chancellor, said Merz to Scholz.

But how is the loss of 300,000 jobs anything but deindustrialization? Merz's answer, should he become chancellor, is to cut bureaucracy and corporate regulation. He's also against calls for a ban on the combustion engine to protect German automakers. I mean, we were kind of world champions in producing cars, but the cars that we produce are also the cars of the past and not the cars for the future. Jana Puglierin heads the Berlin office for the European Council on Foreign Relations.

She says German voters are looking for a new economic formula. So you need to come up with something that is not based on also the old German economic models. I think the export surplus, maybe that is a thing of the past in a world where kind of globalization doesn't work the way we thought it would, where you see more barriers when it comes to free trade and where you see trade also being increasingly politicized.

With new U.S. tariffs and economists predicting a 1% increase in unemployment by the end of this year, and with no sign the recession will lift, Puglierin says whoever emerges to run the next German government will need to implement some new economic ideas or run the risk of being voted out of office once again. Rob Schmitz, NPR News, Memmingen, Bavaria. That's the state of the world from NPR. Thanks for listening.

This message comes from Charles Schwab. When it comes to managing your wealth, Schwab gives you more choices, like full-service wealth management and advice when you need it. You can also invest on your own and trade on Thinkorswim. Visit Schwab.com to learn more.

This message comes from Bombas. Their socks are super plush, designed to support your arches and support people in need. One purchase equals one donated to those experiencing homelessness. Go to bombas.com slash NPR and use code NPR for 20% off your first order.