Germany May Face Irreversible Deindustrialization - CDU Chair

The German economy is expected to be the worst-performing among the G7 nations this year, with the country’s gross domestic product likely to plummet by at least 0.3%.

Germany is facing further economic decline and deindustrialization, Friedrich Merz, the chairman of the opposition Christian Democratic Union (CDU), has told a German news agency.

He pointed to the country’s grim economic indicators, including a summer rise in unemployment, a contraction in industrial production and a 16% increase in bankruptcies in the first half of 2023.

"Germany is losing competitiveness. This is not an abrupt process that triggers an overnight economic crisis [and] instead, we are experiencing a gradual process of deindustrialization in our country. You have to take this very seriously [because] something is happening here at the moment that may no longer be reversible. The federal government must react to this now," Merz warned.

The CDU chairman spoke after the International Monetary Fund (IMF) claimed earlier this week that Germany would be the worst-performing major economy in the world this year as the country’s manufacturing sector remains under pressure.

According to the IMF, the German economy will suffer the only contraction in the Group of Seven (G7) before the end of the year, with the country's gross domestic product (GDP) expected to fall 0.3%. The IMF earlier forecast that growth in Germany's GDP would stay near zero in 2023, before gradually increasing to between 1% and 2% in the period of 2024 to 2026.

This was echoed by Clemens Fuest, president of the Munich-based Ifo economic research institute, who told a US news agency that “it looks like the German economy is really having a hard time getting out of this recession.”

The Ifo earlier reported that the German Business Climate Index declined to 87.3 points in July versus last month's 88.6 and the consensus forecast of 88.0. The index is calculated on the basis of a survey of about 9,000 German enterprises and remains the main indicator of the economic situation in the country.

Paolo Raffone, a strategic analyst and director of the CIPI Foundation in Brussels, told Sputnik in this context that “long term, reliable, low cost and abundant energy supplies from Russia have been pivotal to German industrial sector development and strength.”

He added that the destruction of the North Stream pipelines in September 2022 was “highly symbolic (cutting German energy ties with Russia and Eurasia) and it has had tremendous consequences for the German economy.”

Raffone warned that “without the convenient Russian energy supplies, Germany has entered (again) a period of industrial difficulty that impacts the general economy and the life of people."

Gunnar Beck, a member of the European Parliament for the Alternative for Germany (AfD) part, for his part, told Sputnik that Nord Stream’s collapse and Berlin's move to join the West's energy sanctions against Russia are "not the only source of Germany's declining economic fortunes."

"The German government is pursuing very foolish policies in other regards as well. First of all, there is the so-called green transformation or green agenda. Germany is trying to replace not only Russian energy but all fossil fuels, and it's phased out nuclear energy," Beck said, adding that the Scholz government is aggravating the effects of a decline of energy imports from Russia and may soon face an even sharper economic slowdown.