Germany in economic meltdown as Austria takes EU top spot – Merkel crisis before election

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According to a study by UniCredit Bank Austria, Germany’s industry grew only by 35 percent between 2000 and 2020. In comparison, Austria saw its industry grow by 60 percent in the same period.

The bulk of the growth in Austria came from the mechanical engineering sector with Frey by 140 percent, three times more than in Germany.

Austria’s industrial growth was also 50 percent higher than the growth rate during the same period in the eurozone as a whole.

The blow to the largest economy in the EU comes as Angela Merkel prepares to retire from German politics this month.

Germany is struggling to get back on its feet as it continues to battle with the economic effects of the coronavirus pandemic.

A global supply crunch is threatening to derail the country’s economic recovery with the car industry suffering the biggest downfall.

Companies from BMW, Siemens AG and Volkswagen are all reporting a lack of supply of materials from the most basic wooden pallets to memory chips.

Thomas Nuernberger, managing director of sales at Mulfingen, Germany-based EBM Papst, a maker of industrial fans, told Bloomberg: “In my career we haven’t had a situation with so many commodities being scarce at the same time, and I’ve been dealing with the same materials since 1996.

“This is the most difficult situation in the global supply chain I’ve witnessed.”

He added: “I count on growth being delayed until 2023, because even in 2022 we will still have problems with semiconductors and the container shipping turmoil will also last well into 2022.”

According to Bloomberg Economics, German factories were still operating around 7 percent below their pre-pandemic level as of June, with automakers and machinery manufacturers particularly lagging behind.

Clemens Fuest, president of the Munich-based Ifo institute said: “Things are actually getting worse rather than better.”

Siemens CEO Roland Busch also warned last month that the global semiconductor shortage and the rising cost of materials would risk delaying a recovery “well into 2022”.

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Volkswagen CEO Herbert Diess told Bloomberg TV that his company, Europe’s largest automaker, was “going to see some hits in the third quarter because production now is really constrained”.

The company’s worldwide vehicle deliveries plunged 19 percent in July.

Maeva Cousin, senior euro-area economist at Bloomberg Economics said: “Despite a surge in orders, Germany’s industrial recovery has been hampered by severe supply disruptions.

“We anticipate the industrial sector to start contributing positively to growth from 3Q.

“True enough, advances are likely to be gradual and bumpy, but as services continue to respond swiftly to the reopening, the impact on growth should be small.”

Germans head to the polls on Sept. 26 in a parliamentary election after which centre-right Chancellor Angela Merkel is stepping down.

After 16 years in power, Merkel’s conservatives are facing defeat, with a poll this week showing the centre-left SPD with a five point lead. A separate snap poll showed the SPD candidate for chancellor, Olaf Scholz, beat other candidates in a televised debate on Sunday.

Polls suggest Scholz could have several possible paths to form a coalition. However, when pressed during Sunday’s debate, Scholz did not categorically rule out forming a coalition with the far-left Linke party. Conservatives say this would mean a big lurch away from Germany’s centrist mainstream.

“With me as chancellor there would never be a coalition in which the Linke is involved, and whether this (stance) is shared by Olaf Scholz or not remains open,” Merkel told a joint news conference with Austrian Chancellor Sebastian Kurz.

“In this context, there is simply a huge difference for the future of Germany between me and him,” she added of Scholz.

Mrs Merkel’s conservatives’ candidate for chancellor, Armin Laschet, has failed to capture voters’ imagination.

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