Minister declares Germany’s economy is ‘cornered’

(MENAFN) Germany's Economy Minister Robert Habeck has warned that the country is facing significant economic challenges due to underinvestment and external pressures from other major economies. In an interview with Bild newspaper, Habeck described Germany's economic model as being "cornered," but expressed optimism that the situation can be turned around. He attributed the difficulties to insufficient investment in infrastructure, the tax system, and workforce skills, which have had a negative impact on the nation's economy.

Habeck also pointed to global factors exacerbating Germany's struggles, including US President-elect Donald Trump’s threats to impose higher tariffs on foreign cars, which would particularly harm German exports. Additionally, he highlighted the influx of Chinese-made electric cars into the European market, which poses a major challenge to Germany's vital automotive industry. Car manufacturing represents around 5% of Germany's GDP.

The Ifo Institute for Economic Research predicts that tariffs could cost Germany €33 billion ($34.6 billion) and lead to a 15% decline in exports to the US. Despite these challenges, Habeck remained confident that the problems could be addressed, though he did not offer specific solutions.

The German central bank recently revised its growth forecast for 2024 down to just 0.2%, a sharp decrease from its earlier prediction of 1.1%. The economy is expected to contract by 0.2% this year, following a 0.3% shrinkage in 2023, attributed to high inflation, elevated energy costs, and weak foreign demand.

Germany is also facing a political crisis, with Chancellor Olaf Scholz’s coalition government collapsing earlier this month, leading to a snap election on February 23.

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