After two consecutive years of recession, the Bundesbank expects only a very weak recovery in growth in 2026, i.e. 0.6%. Germany is thus one of the worst performers among European economies. Long cited as an example for the rigour of its management, its controlled inflation and its large trade surpluses, the country now appears to be the sick man of Europe because it does not seem prepared to respond to the challenges caused by the fragmentation of the world economy and the growing competition from Chinese companies.

This is not the first time that its status as a model country has been affected. In the aftermath of reunification and in the face of the disastrous state of the East German economy, contrary to the widespread idea in the West that it was the most efficient industry in the countries of the East. It was going to be necessary to restructure the production apparatus and close the considerable gaps in living standards. Thanks to the personal relations that François Mitterrand had established with Gorbachev and Kohl, the reunification was peaceful and democratic. It is regrettable that there is no one today with this stature, which would surely have prevented Europe from losing its influence on the international scene.

However, Berlin managed to overcome this challenge thanks to its companies, which invested in former communist countries to reduce their costs while keeping the final assembly of products on their soil. Thus the method described by Paul Valéry more than a century ago to explain the country's successes was respected: "to bring back from all parts of the world to all points of Germany the maximum amount of wealth". In a decade, the country has thus regained its status as a model economy in the European Union, contributing decisively to the creation of the euro and the adoption of rules appropriate to its model of shared prosperity within its companies.

It is this model that has been the guarantor of the competitiveness of German industry based not on the reduction of its production costs but on the quality of the products, their ability to meet the expectations of customers in Europe thanks to a highly qualified and fairly paid workforce. Its companies have also established themselves in the United States and China, where they have benefited from thirty years of exceptional growth following the reforms initiated by Deng Xiao-Peng. German growth has been fuelled by trade surpluses and, because of the low birth rate, has been sufficient to ensure full employment and to guarantee, if not balance, at least the maintenance of public debt at one of the lowest levels in the Union.

On this point, which has increased Berlin's influence in Brussels, it is nevertheless necessary to make two nuances: the low level of military spending, 1% of GDP until 2024 compared to 2% in France, has contributed to limiting public debt. The choice of a capital-based pension system has made it possible not to include employees' contributions in compulsory deductions, which has artificially reduced their level, especially compared to that of France. German industry has been exceptionally successful over the past twenty years. But this success has now come to an end if we refer to the latest figures on growth and inflation.

This situation is the result of major strategic errors stemming from the political alliances concluded to keep Angela Merkel in power when her party did not have an absolute majority in the Bundestag. The first concerns budgetary policy and the obsession, perhaps inherited from the crisis of the 1920s, with inflation and public deficits, to the point that a ceiling was inserted into the German constitution, a ceiling that has just been lifted under certain conditions. Germany is facing a worrying deterioration of its infrastructure and a lack of its defence equipment, while the tensions arising from Russia's invasion of Ukraine require a major effort in this area.

After the suspension of the brakes on public spending, the announcement of a vast public investment plan should not be deceived. The figures relate to several years and between the time the decision is made public and the time when the expenditure becomes effective there is always a long period of time. The impact on growth will therefore take time to be effective.

The other major strategic mistake concerns energy policy. The abandonment of nuclear power met the demands of both the ecologists and the voters of the coal regions, necessary for the Chancellor to remain in power. The mines would remain open to power plants to produce electricity when, in the absence of sun or wind, renewables would be shut down. Since coal-fired power plants were not enough, Germany also needed natural gas and its government made another major mistake by choosing Russia as its preferred supplier.

However, as early as 2014, with the annexation of Crimea, it was possible to foresee that a partnership with Moscow was a random and even dangerous choice for such a strategic raw material. With the sanctions drastically reducing access to Russian gas, Berlin has been confronted with a very sharp rise in electricity prices which has weighed on the competitiveness of companies and on inflation. With well over 2% per year, the country has become one of the bad pupils of the euro zone and purchasing power, and therefore household consumption, has been affected, which explains the stagnation and even the recession observed in recent years.

Nor did Germany anticipate the transformation of the Chinese economy. The automotive sector, which has long been the strong point of its industry, will suffer doubly. For a long time, owning a vehicle of a foreign brand was, in large cities such as Shenzhen or Shanghai, a sign of social success and German manufacturers had been the main beneficiaries. This is less and less true. The Chinese industry has made considerable progress and is able to offer high-end vehicles. Their possession has now also become a sign of social success.

But that's not all. The size of the Chinese market has allowed production volumes much higher than those observed in Europe and therefore cost reductions and increased competitiveness that will only marginally affect the customs duties requested, which is not the least of the paradoxes, by Germany. The shift towards electric cars will further increase the dominance of Chinese groups since they master the raw materials essential for the manufacture of batteries and here again, their vast domestic market provides them with a decisive advantage.

For the first time in 50 years, we are seeing plant closures and downsizing in industrial sectors that have been the strengths of the economy until now. Germany still has large trade surpluses but these are set to decrease. The public finances are in a better position than those of its neighbours, but for the wrong reasons, since it is the result of a large investment deficit. 

These difficulties will not be without consequences for European economies and this is why Berlin must seek partnerships with their companies in sectors as strategic as energy, aeronautics or defence where everyone would win. This would make it possible to mitigate the consequences of its past choices in an international environment that has become unfavourable and which will remain so, and the country to regain its dynamism.