As of: February 17, 2024, 6:00 p.m
By: Marcel Reich
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Despite major investments from Microsoft and other companies, the DIHK sees an impending economic crisis.
The supply chain law could be on the brink.
Munich – According to the industry association DIHK, the biggest economic crisis in more than 20 years is brewing in Germany.
For only the second time in post-war history, there will likely be a phase of two consecutive years of declining economic output.
DIHK General Manager Martin Wansleben called on the traffic light government made up of the SPD, Greens and FDP in Berlin on Thursday to put together a courageous package of measures to strengthen the location and to suspend the German supply chain law.
Chancellor Olaf Scholz contradicted the portrayal of a crisis during a visit to the Microsoft site in Berlin © Sebastian Gollnow/dpa
During a visit to the Microsoft site in Berlin, Chancellor Olaf Scholz contradicted the depiction of a crisis and referred to major investments that had been announced.
Following companies like Intel and TSMC, Microsoft announced that it wanted to invest 3.2 billion euros in the expansion of artificial intelligence (AI) in Germany.
The US technology giant also explained the plans with good work by the federal government, which has recently lost a lot of public trust in surveys.
German Chamber of Commerce and Industry: “Clear alarm signal”
After a survey of over 27,000 companies from all sectors and regions, the German Chamber of Commerce and Industry (DIHK) expects the German economy to shrink by 0.5 percent this year.
In 2023 it already fell by 0.3 percent.
“This is a clear warning sign,” said Wansleben.
“The bad mood among companies is becoming more entrenched.” There were significantly greater downturns in 2009 due to the global financial crisis and in 2020 due to the Corona lockdowns.
But only in 2002 and 2003 did the economy contract for two years in a row.
At that time, the red-green government reacted with “Agenda 2010” - far-reaching labor market and social reforms.
State benefits were cut, protection against dismissal was relaxed, and temporary employment was made easier.
Many economists consider the structural reforms at that time to be the main reason for the now much lower unemployment rate and a long phase with comparatively high growth rates.
Wansleben said the current traffic light government must face the problems and get started immediately.
“The crisis is here.” Everything must be done to make life easier for companies without increasing inflation at the same time.
For example, bureaucracy could be reduced much more significantly.
“The German supply chain law must now be suspended.” The law makes larger companies liable for deficiencies in their supply chains.
Within the federal government, Finance Minister Christian Lindner (FDP) and Economics Minister Robert Habeck (Greens) recently described the location as no longer competitive - but offered very different solutions for it.
SPD politician Scholz, on the other hand, repeatedly warns against creating a crisis.
“We are currently seeing large-scale investments here,” said the Chancellor in Berlin, referring to the areas of batteries, cars, chips and pharmaceuticals.
Other AI companies would benefit from the announced Microsoft investments.
Microsoft praises the German government – Ifo sees home-made problems
Microsoft President Brad Smith praised Germany for ranking second in the world in AI usage.
“This shows that the introduction of AI in German companies, large and small, is progressing very quickly throughout the economy.” The planned data centers in the Rhineland and the Rhine-Main area should be operated with green electricity, the expansion of which is being pushed forward by the federal government .
The investment - Microsoft's highest in Germany in 40 years - is a vote of confidence in Scholz and the government, said Smith.
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The Chancellor explained Germany's current weakness primarily with the sluggish global economy, from which the local export industry is suffering.
“The weak growth can be explained not only by factors that come from outside, but also by home-made problems,” said the President of the Munich Ifo Institute, Clemens Fuest, to the “Rheinische Post”.
This includes the high level of uncertainty about the future course of economic and climate policy.
“A central problem is that the federal government does not have a convincing medium-term growth strategy.” The traffic light must overcome its internal differences, reduce taxes for companies, reduce bureaucracy and increase public investment.
Lindner calls the growth forecast “embarrassing and socially dangerous”
According to Lindner, the traffic light wants to present a concept to strengthen the business location by spring.
The Greens advocate a special fund for investments financed through debt, while the FDP relies on tax relief and reductions in bureaucracy.
The SPD wants to prevent cuts in the social sector.
Next week, the federal government will officially lower its growth forecast for 2024 from 1.3 to just 0.2 percent.
Habeck said in Jena that 0.2 percent was in no way satisfactory.
The finance minister called the new forecast on Wednesday evening “embarrassing and socially dangerous.”
Germany will thus end up in the bottom group of industrialized countries again.
“If we do nothing, our country will fall behind.
Then Germany will become poorer.”
Within Europe, Germany continues to be the brake.
The EU Commission expects gross domestic product in the euro zone to grow by 0.8 percent in 2024 instead of the previous 1.2 percent.
The forecast for Germany is 0.3 percent, lower than for any other euro country.
In the fall, the Brussels authorities had estimated an increase of 0.8 percent.
With material from Reuters