Germany is typically considered an economic powerhouse in Europe. The country was once an exemplary model of growth at a time when many other major developed economies were struggling. Unfortunately, the International Monetary Fund predicted Germany to be "the worst-performing major developed economy" in 2023. In recent years the country has suffered from a variety of economic blows.
In support of Ukraine, Germany no longer sources their energy from Russia. Due to this, there have been times when energy prices have more than doubled. Inflation influenced consumers to decrease their spending. To combat this, the Central Bank raised interest rates harming the development of new infrastructure.
Many of the main forms of transportation and new housing/work spaces were negatively affected by the decrease in spending on infrastructure. However, this is not all attributed to rising interest rates. Covid relief funds were meant to be allocated to modernizing the country for economic and environmental benefit. Unfortunately, these funds were unable to be reallocated and a budget crisis ensued.
Germany must now rework their budgets while struggling with other economic stressors.
3 comments:
Could the shrink in the German economy also be because of how due to Nazi Germany they aren't allowed to explore nuclear energy while neighboring countries benefit from it?
Its very unfortunate for Germany that the Russia-Ukraine war has had such a major impact on their economy. I remember when the war first broke out and Germany announced they wouldn't purchase energy from Russia, there were serious talks about what that might do to their economy and how long they could realistically hold out. Its good to see a nation stand up for what they believe in, especially if its an anti-war cause, but tis tragic to see such a heavy toll in this instance. Obviously in hindsight they shouldn't have been so reliant on a state like Russia for their energy needs, but its still upsetting to see them go from being near the top of that list to being at the bottom. I imagine major energy policy changes will be coming soon for Germany.
It is interesting to see how quickly such a strong economy can see major economic struggles. The decision to stand in solidarity with Ukraine seems to have started a cascading effect and out Germany in a very difficult spot. I am sure they will recover eventually but I am curious what implications, if any, this will have for neighboring countries or other economic partners of Germany.
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