For another year the German economy will remain stuck to zero, which negatively affects the climate in the country. What are the forecasts of the top IW Institute of Economics. Dw was there.

Interview with dw

For weeks, negative forecasts for the course of the German economy have succeeded each other as a peculiar “welcome” to the new Merz government. In one of them, in the report of the important Institute for the German Economy (IW) based in Cologne, it is noted that stagnation in growth indicators leads more than one in three businesses, especially in the fields of industry and buildings thinking that in 2025 it should cut into jobs.

We met in Cologne one of the authors of the exhibition, Economics Professor Michael Greling, and first asked him about the consequences of this labor market approach.

The labor market will be pressured

“Germany has been a positive development in the field of employment for many years. We have managed to create over 5 million new jobs for the past ten to fifteen years. This process has been stopped for some time. We have estimated that this year we will have a 0.2%reduction in employment. This proves that the labor market is suffering from the lazy geopolitical crises, ”the economist points out.

The crises are indeed lazy and existent. But do the constant negative forecasts affect the mood of the economy’s factors and lead to actions that ultimately confirm the negative prognosis and lead to new even worse creating a vicious cycle?

Greming notes: “We have long noticed that consumer disposition in Germany is especially positive. Especially the rise in prices made consumers be extremely cautious. These are the bad prospects for the economy and the concern of many about jobs. This affects the growth indicators of the economy and that is what we expect for 2025. This sharp decline in the overall climate will not be easily overcome. “

The “factor” Donald Trump

It has been heard very often in recent days that Trump policy will affect even worse the course of export -oriented economy, such as the German economy. How important are US decisions ultimately?

“We are in the vortex of looming crises. The global economy brakes due to the consequences of the decisions of the first Trump government, came after a major pandemic burden. She hit the German economy harshly and then the war in Ukraine followed. All complications from this war and tense relations with China were additional reasons for the difficulties of the German economy. The announced Trump decisions on tariff policy and world trade will affect both the German and the world economy. “

Where will the billions invested?

There is a lot of talk about reforms and reorientation, and there is also this much -discussed package for investments of 500 billion. Is these enough to change the mood and to reversing the downward trend?

Greming believes that this investment package is a very important, but only first signal. He points out that “this money should be used effectively and reasonably. This will be the decisive point. Use these funds in the next decade to raise the growth dynamics we need urgently. “

We are in a period of very important demographic burden on the at the same time the professor of economics. “The number of workers will be reduced in the coming years and this will necessarily lead to similar adjustments. We are already seeing this time that social contributions of employers and workers will rise significantly, and this trend shows that it will continue. ” This issue is already provoking reactions from opposition parties and trade unions.

Necessary to decline in conflict

Can Germany finally recover and with it pull up the rest of Europe? According to the German economist, “we must consider the geopolitical situation we are in. The German economy is an economy open to the world. Few countries have so much participation in world trade and this poisonous climate in the world is natural to affect us. We need to take into account all these global conflicts that are an overturn for all European economies. “

In Greling’s opinion, if there is no decline in these conflicts, the global economic crisis will be very difficult to overcome. The professor admits that increasing energy costs is a major cause for industry and economics as a whole, but he believes that there should be some changes in the field of excessive regulations in Europe. “Germany is closely linked to too many countries and this web should become more elastic so that we can cope with new data and new challenges.”