The struggling German economy is facing the risk of once again being labeled the ‘Sick Man of Europe’ if it fails to address its structural issues, according to Deutsche Bank CEO Christian Sewing. The term “Sick Man of Europe” is often used to describe European countries that experience economic difficulties, social unrest, or impoverishment. Germany was given this label in the late 1990s and early 2000s, and Sewing warns that it could reclaim this status if immediate action is not taken.
In his address at the Handelsblatt Banken Summit 2023, Sewing acknowledged that while Germany is currently not the “Sick Man of Europe,” there are underlying weaknesses in the economy that hinder its development and potential. He highlighted several key issues, including high and unpredictable energy costs, slow internet connections, outdated rail networks, digitalization backlogs, a lack of skilled workers, excessive bureaucracy, and long approval procedures. These structural issues are holding back Germany and need to be addressed urgently to avoid a decline in economic performance.
The German economy, as the largest in the EU, is currently facing challenges in its manufacturing sector, particularly with higher energy costs. In the first quarter of this year, it officially entered a technical recession, with GDP growth being revised from zero to -0.3%. The Bundesbank, Germany’s central bank, stated on Monday that the economy is likely to shrink further this quarter due to slow private consumption and the increasing weakness of the industry.
Sewing emphasized that Germany should not deceive itself about its international competitiveness and should recognize that it still lags behind its global rivals. He noted that the current economic situation, influenced by interest rates, may obscure this reality to some extent. However, it is crucial to address the underlying issues that prevent Germany from fully realizing its economic potential.
Furthermore, Sewing emphasized the importance of European economies avoiding dependency on non-European banks. He stated that banks have a significant role to play in the changing global landscape, and a framework should be created in Europe to provide banks with more flexibility in lending, facilitate capital market financing, and enable Europe-wide growth.
The German economy’s current challenges and the need to address structural issues highlight the importance of sustainable economic development and fostering a favorable business environment. By taking proactive measures to tackle these problems, Germany can strive towards stronger economic performance and avoid the “Sick Man of Europe” label.