In the face of Corona … how did the German economy outperform the countries of Europe?

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The German economy was able to face the repercussions of the Corona crisis with great flexibility and avoid the recession that many European countries experienced during the last period, but it will need the economies of its major partners on the continent to recover in order to fully recover.

In a report published by the magazine “Der Spiegel” (The mirror(German), writer Klaus Hecking says that Germany has so far managed to overcome the crisis with the slightest damage, unlike the major economies on the continent, for several reasons, the most prominent of which is the dependence of the German economy on industry and the government aid program and not resorting to complete closure, but the situation remains fragile, according to his opinion.

The head of the Kiel Institute for the World Economy, Gabriel Felbermayr, believes that the current crisis has shown the size of the disparity in economic growth between major European countries, as Germany clearly surpassed others in terms of health and economy, and explains that the stability of consumption rates in Germany helped in the recovery of the economy significantly.

“Germany is one of the best major economies in the world,” says Clemens Voest, president of the Munich Institute for Economic Research.

But what are the reasons for the German economy’s superiority over the rest of European countries in facing the Corona crisis?

The German economy was more consolidated before the crisis

The head of the Kiel Institute says that the Corona crisis struck Europe in different economic conditions, as the Italian economy has been in a continuous state of recession for decades, Spain is living on the impact of the repercussions of the euro crisis, and Britain is in a state of uncertainty due to the decision to leave the European Union, while France is struggling due to Economic reform programs falter.

As for the German economy, it was a far cry from these serious structural problems, and thanks to nearly 10 years of economic prosperity, many German companies were able to achieve profits that enabled them to overcome the Corona crisis with the slightest damage.

Many German companies managed to achieve profits that enabled them to overcome the Corona crisis with the slightest damage (Reuters)

Partial Close Policy

The high number of daily Coronavirus infections during the first wave in Spain and Italy made the governments of the two countries take a decision to impose a complete closure to prevent the spread of the epidemic, which paralyzed the economy for several weeks, and the British government took the decision to close at a later time, but it continued for a longer period and caused economic losses Larger.

In Germany, the virus has not spread significantly, so companies have not been subject to strict lockdown measures.

“Unlike France, for example, we did not witness a complete closure in Germany, with the exception of the auto industry, and many companies continued to operate in one way or another,” says Voest.

Industry reliance

The collapse of the global tourism sector led to a decline in the economies of France, Spain and Italy, which are considered one of the most important European tourist destinations. On the other hand, the German economy was not affected much because the tourism sector is not of the same importance compared to the industrial sector that enabled Germany to withstand the crisis.

Voest confirms that German industrial exports have started to recover quickly, although they did not reach their levels a year ago, explaining that one of the most important features of German industry is flexibility.

Voest adds that one of the strengths of German industry is the diversification of exports. With the decline in the automotive and mechanical engineering sectors, exports of the pharmaceutical industries have witnessed a steady growth.

Government support for individuals and companies

Another factor that led to the German economy’s resilience in the face of the crisis, as the writer says, is that the German government was very generous with workers and companies, as it adopted a part-time system, which is based on providing a large part of salaries to workers with fewer working hours, and to encourage consumers to Spending continues, the federal government and the rest of the states cut value-added tax.

In Britain, the government intends to stop another part-time work program, which could lead to a severe unemployment crisis, and government aid in Spain and Italy is much less than what Germany has allocated in terms of money to overcome the crisis.

The German government was very generous with workers and companies before the Corona crisis, which contributed to the resilience of its economy (Getty Images)

The situation is still fragile

Despite the many positive indicators, such as the recovery of the German “DAX” stock index, which compensated for its losses from the first wave, and the rescue of “Lufthansa” – the largest German airline – from the severe crisis it faced, the decline in the number of bankrupt companies, and the decline in unemployment rates Relatively speaking, the German economy is not immune from the repercussions of the Corona crisis.

The writer affirms that the German Stock Exchange is still in a state of instability, and that the “Lufthansa” company may lay off a large number of employees, and experts fear a sharp bankruptcy wave once the debt-ridden companies are forced to declare bankruptcy.

Voest believes that the economic recovery and return to what it was before the Corona crisis will not be soon.

Felbermayr also expressed his surprise at the wave of optimism, saying, “It is difficult to understand why companies evaluate the situation as they did in August of last year. (Truth) Optimism in Germany is exaggerated, as many companies appear to be in a good position on the surface, but their investments are low. Therefore, it seems alarming, even in Germany. ”

The writer concludes that the German economy has already succeeded in absorbing the dangerous repercussions of the Corona crisis, but it will not be able to fully recover on its own, and it may face major problems if the major partners, such as France, Italy, Britain and Spain are not able to overcome the crisis.







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