2014 September 24 Wednesday
German Companies Reducing Investment In Germany?

Has Germany peaked?

The German economy has shied away from investment for years. Companies have almost €500 billion stashed in savings, according to the DIW president's estimates, and yet the investment ratio in the German private economy fell from just under 21 percent in 2000 to a little more than 17 percent in 2013.

Many economists conclude that companies are anxious because they are worried not just about crumbling roads, but about the lack of qualified workers, the state of the euro zone and rising energy costs. And this fear, in turn, is stymying the planning for Germany's future.

Companies respond to costs. Germany has about 3 times the electric power costs of the United States. Though industrial buyers are not paying as much as residential buyers. Still, industrial buyers still pay much more for electric power in Germany than in the United States. A big thanks to go big subsidies for solar power in a country that doesn't get a lot of sun.

Germany's economic has been slow since the year 2000.

Since 2000, GDP growth has averaged just 1.1% annually, ranking 13th in the 18-member eurozone.

Germany is the world's third largest arms exporter (and I would not have guessed that). But German weapons companies (why call them defense companies?) are looking to move abroad because of new restrictions on weapons exports by the German government.

Share |      By Randall Parker at 2014 September 24 10:41 PM 


Comments
DdR said at September 25, 2014 6:39 AM:

Crumbling roads?? Ha, that one's funny. If you compare German roads with American roads, there is no comparison. I live in arguably the richest county around NYC (Westchester#, and the amount of enormous pot holes and just horrible roads is staggering given that there are so many rich people here. Apparently the towns don't have any money to repair the roads, but by god, the police and fire department have brand-new, top-of-the-line vehicles, and every traffic stop requires at least back-up.

I work for a German corporation and have lived a few years in Germany #also speak the language fluently#. My company's doing pretty well, but it's very reactive to any negative events. The business environment was ripe from 2009-11 #we could've made a lot of money#, but because of the issues in Greece, the board decided to stay put. Now we're doing business like crazy to catch up to those lost years, but the conditions aren't as lucrative.

The big issues in Germany are that you have highly qualified workers with great work ethic, but not much entrepreneurism. You have consumers with plenty of savings, but are frugal because of economic conditions. Deep industrial base, but plenty of Greens who basically want to dismantle that #e.g., get rid of all nuclear plants, €3.50/gallon Mineralöl- und Mehrwertsteuer, etc.). Proud of their soccer team and companies, but ashamed of their country and past. Want to be a part of the EU, but don't trust the Southern Europeans. Lots of dichotomies in Deutschland, but if my girlfriend would agree, I'd move back there in a heartbeat.

Ultimately, I think Germany, Netherlands, Flemish Belgium, Poland, Luxembourg, Austria, and Czech Republic are going to break off from the EU and form their own currency and economic union. I think there's too much scepticism towards Southern Europe and France, about how they manage their political and economic affairs.

And Randall, why can I put parentheses in the comment field? They pop up as # signs.

Dan said at September 25, 2014 12:32 PM:

Yes, good job pointing to energy costs. Germany's economy is centered on manufacturing and yet their energy is double the European average. This is an own-goal.

They shut down their nuclear plants and then turn around an buy nuclear power at a huge markup from their neighbors. Focusing on solar power in one of the least sunny places on Earth is very hard to understand.

Because of the rejection of nuclear they've been resorting to burning coal shipped all the way from America. So green!

Seth W. said at September 25, 2014 4:46 PM:

I'm ready to bet the small industry will come about all over the world sooner and at a faster rate than most expect.

Engineer-Poet said at September 26, 2014 1:41 PM:

() Parentheses work for me.

Randall Parker said at September 27, 2014 11:21 AM:

DdR,

It is not obvious to me why (parens) should be a problem for you.

I think it makes sense for the EU to break into at least 2 pieces. A north central economic union would make a lot more sense. But do you really think they'll go thru with such a split?

Germany's demographics argue for stagnation of total GDP and perhaps even stagnation of per capita GDP. The population is aging and they aren't having enough smart babies.

Bad roads: Coastal California is much better because there is no winter ice and salt to tear up the roads. NY State is lousy because too much of the tax money goes to the welfare state.

Seth W., what do you mean by "small industry"?

Wolf-Dog said at September 27, 2014 3:31 PM:

It is also argued that Germany actually benefits from the current monetary structure of the EU, by being more competitive thanks to the pricing of the euro currency that favors the German exports. Thus, currently it is still in the interest of Germany to keep the southern European countries in the EU, and not doing so would seriously hinder the German economy. The percentage of the German economy that depends on exports, is even greater than the corresponding percentage in China.


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