The situation is bad, the omens look bleak. The German government expects another year of recession for Germany. The economy will have shrunk by 0.2% by the end of 2024 – contrary to previous estimates Berlin for limited growth of 0.3%. It is the second time in the country’s post-war history that the German economy has been in recession for two consecutive years.

“The German economy has not shown strong growth since 2018,” admitted the Finance Minister, Robert Hambeck. Further efforts should be made to “ensure that Germany returns to a long-term growth trajectory”. A climate-neutral energy system must be built and there must be a reduction in bureaucracy that will be felt in the economy. “Only that which provides practical convenience is of value.”

“The German economy is under increasing pressure,” Clemens Fust, president of Munich’s Ifo Institute, said recently after the fourth consecutive fall in the Ifo business climate index. Businesses are unhappy with the current situation and their expectations are very low.

The Hans-Böckler Foundation’s Institute for Macroeconomics and Research on Economic Activity (IMK), which is close to the trade unions, also lowered its forecast for economic activity: in 2024 GDP will eventually grow to 0.0%. In his statements to Reuters and taking into account all this, Christoph Schwonke of DZ Bank had characterized Germany as “the new problem child of the euro countries”.

Foreign interest in German companies

An environment such as that currently offered by Germany is not particularly attractive from an economic point of view. Many German companies are turning abroad for financial help – such as Deutsche Bahn, which is seeking to sell Schenker, its freight company. The supervisory board has just approved the sale of the company to Denmark’s DSV for 14 billion euros – a much-needed “injection” of hot cash for the loss-making German state-owned company.

Another typical example is Commerzbank, which during the financial crisis was bailed out by the German government – ​​and to this day Berlin still holds around 12% of the bank’s securities. Italy’s Unicredit, which plans to take over the entire bank, also acquired a stake in Commerzbank in September. According to a Reuters report, the ECB, which must give its approval, has already agreed in principle.

In addition, there are other companies that confirm the finding that many German companies are looking to expand abroad or are in search of foreign capital: chemical giant BASF is opening a branch in China for 10 billion euros, while energy services provider Techem is to be sold to the American venture capital firm TPG.

“Companies don’t have passports”

Many observers see the takeover of German companies in which German taxpayers still hold a stake as perfectly normal. For Carsten Brzeski, chief economist at ING Bank, it is clear that “economic stagnation and structural changes have natural consequences for businesses as well”. As the expert tells DW, “in such periods we often reach acquisitions – either by companies within the borders, or from abroad”.

Stefan Koetz, director of the Kiel Institute for the World Economy (IfW), emphasizes that “businesses do not have passports” – which means that “the nationality of the owners of a company is not decisive for the prosperity of a country, but the quality of the location”.

As Koots further observes, “the downward trend of direct investment in Germany is yet another indication of the weaknesses of the local business environment.” Strong business locations attract capital from abroad, while “weak locations are shunned by investors.”

According to the expert, the influx of non-German capital into the domestic market is not a negative thing. On the contrary: “If foreign investors have better ideas about the exploitation of resources in Germany, it will ultimately benefit domestic entrepreneurs through increased productivity.”

The eternal problem of bureaucracy

Since the 1980s, all governments have promised to cut red tape in order to increase investment. For decades, however, nothing has changed radically: “Efforts are being made, but the measures taken are not changing much,” says Stefan Koots.

Of course, this does not only concern Berlin, but also the EU, which also has a share of responsibility and does not make the situation particularly easy, “especially with the system for reporting – from the EU Taxonomy to the regulations on supply chains” , as the expert explains.

According to Carsten Brzeski “we urgently need more digital governance. This would accelerate the reduction of bureaucracy, while also compensating for the lack of manpower in many services.

Is the “green road” effective?

In Germany, the Minister of Economy is also responsible for climate protection, while in Brussels the European Commission is charting a “green road” with an eye to the future. However, both Coates and Brzeski do not think that prioritizing ecology can help the economy as well. “The bottom line is this: decarbonisation cannot be a driver of growth,” Coates points out. Because “decarbonisation policy has too much of an interventionist element”.

Brzeski’s position is similar: “The focus on green technologies has led to very little investment so far. It would be short-sighted to bet exclusively on “green”. Over the last decade, the German economy has lost a huge part of its competitiveness, and that is where we should start as a starting point now.”

“No” to protectionism

Stefan Koetz agrees that the competitiveness of German industry is the key to a return to growth.

The expert explains to DW that the current development initiatives “are moving in the right direction, but they are not able to decisively change the trend. For this to happen, there will need to be a fundamental shift away from interventionist industrial policy towards one that aims to strengthen business location.”

Warning against “capital protection” practices, Koots categorically states that the German government should not take action against the impending takeovers of German companies. Instead the expert refers to the laws of the market, according to which companies become candidates for acquisition “when their structures are no longer able to keep up with the competition”.

Edited by: Giorgos Passas