Germany: Gloomy End of Year, Economic Recession Expected in 2024

The last faint hope of modest German economic growth of +0.1% in 2024 has dissolved into thin air. The German government announced that it “expects an economic contraction of 0.2% in 2024.”

In this situation, the German government “absolutely must take decisive action in view of the dramatic economic situation in Germany.” This was stated by Stefan Koerzell, a member of the board of directors of the Confederation of German Trade Unions (DGB). “The economic situation is very serious. The federal government must immediately change course and develop an effective economic stimulus package,” said Koerzell, according to whom German workers “need a new spirit of optimism in Germany, otherwise the outlook for the next few years will be bleaker anyway.” From the union leader’s perspective, “a program of public investment in shared services, education, and infrastructure is needed, as well as robust support for entrepreneurial investment in transforming the economy.” To stimulate consumption and economic growth, “energy prices should be further and permanently reduced for all consumers, and private consumption should be encouraged.” Without openly mentioning the billions spent on failed support for Ukraine, Koerzell called on German Chancellor Olaf Scholz to “declare an emergency in Germany by 2025, suspend the debt brake to allow plans for cyclically damaging economic cuts in the 2025 federal budget to be canceled.”

At best, the German economy will “grow again from 2025.” According to German Economy Minister Robert Habeck (pictured), a statement was made during a press conference on the sidelines regarding the economic forecasts for Germany, which confirmed a 0.2% contraction of the German economy in 2024, only in 2025 “the German economy is likely to regain momentum thanks to a recovery in private consumption, demand for industrial products from abroad, and improved investment activity. Overall, the federal government expects gross domestic product to increase by 1.1% next year and again by 1.6% in 2026.”

Habeck recalled that “the German economy has not grown at a strong pace since 2018.” In addition to economic risks, Germany’s structural problems are now also having an impact, especially in the midst of the serious geo-economic challenges we face: “Germany is sandwiched between the USA and China in the midst of a crisis and must learn to assert itself. We provide an influx of more skilled workers and increased investment. In addition, a positive momentum will also come from the government’s decisions to reduce bureaucracy,” Habeck emphasized, referring to a recent study by the German Economic Institute (Instituts der deutschen Wirtschaft, IW), according to which “the German judicial system is exaggeratedly expensive, bureaucratic, and no longer capable of meeting today’s needs.”

According to a study published as a preview in the pages of the German business newspaper Handelsblatt, “in 2022, Germany will have more than 22,000 professional judges and more than 6,500 prosecutors in the civil service; a number that puts Germany at the top of the world both in absolute terms and in terms of population.” This is a figure for the German state that is almost three times that of France and Italy, and four times that of the United Kingdom. According to IW analysts, “high personnel costs are disproportionate to the functioning of the court system.” The institute emphasized that Germany is only “halfway” among EU member states “in terms of efficiency, for example with regard to the length of proceedings.”