In less than thirty years, once the unification of the Eastern provinces was successfully achieved, Germany has become the good if not the best pupil of the European Union. It could so set its conditions for the creation of the euro, bolstered by its foreign trade surplus, the rigorous management of its public finances and its low inflation. It revived the great principles which had made its prosperity. As far as back 1895, Paul Valery, the French essayist, had shown that it was coming from its ability “to make returning the maximum of wealth from all the places in the world to all the places in Germany”. And Ludwig Erhard, the Finance minister of Chancellor Adenauer, before becoming himself Chancellor, had fixed at the end of the Fifties, as a principle that that wealth must bring “prosperity to everyone”.

But that time is over. After years of huge foreign trade surplus, the country comes close to a deficit. The August trade balance surplus was only approaching 600 million euros against 11.6 billion a year before. The last inflation figure year on year is 10.9%, i.e. above the euro zone average (9.9%), Italy (9.4%), Spain (9.0%) and especially France (6.2%). The multiplication of the geopolitical tensions, the invasion of Ukraine by Russia and the deterioration of the relationship between China and Western countries have put an end to the happy globalization period Germany had known to take advantage from better than a lot of other countries.

The first cause of the weakening lays in the heavy strategic mistakes made in power production. They would have appeared sooner or later. The war in Ukraine and the sanctions against Russia have carried immediate effects through the explosion of the energy prices. In order to get the ecologist votes, the successive German government have decided and then confirmed the abandon of the nuclear power production and launched a large program of construction of wind turbines. But that source is intermittent. Germany has coal deposits. Its combustion allowed to protecting the mining activities and to keep jobs in provinces which were very important regarding elections.

Regarding natural gas, the choice in favor of Russia with the building of the two North Stream pipe-lines, had as an objective, to make that country an economic partner providing important markets for the German industry. The use of gas or coal power plants was all the more important that the wind farms were located in the North of the country and that it has been very difficult to build the connections to supply the regions in the South, which are highly power consuming. Another factor is at the origin of the German power crisis. France, which traditionally exports electricity, has had to stop the production of several nuclear plants at the worst time, which has disequilibrated the market. At the same time, the reduction of the Russian natural gas has generated a sharp rise of the prices which then were passed on the electricity prices, due to the European regulations which had been by large elaborated on the basis of German proposals.

Then France has had to stop its exports and has become an importer. In July 2021, the country had a positive balance of 7.3 TWh bringing in 558 million euros. In July 2022, the balance has become negative, with 3.22 TWh with a cost of 1.455 billion euro. In one year, the electricity price on the European market has risen for one TWh from 76 to 452 million euro. But the difficulties of the French nuclear plants, made worse by the closure of the Fessenheim power plant, asked by Germany, are temporary and would be solved before next summer. France will become again an exporter and if the current European regulations linking the KWh price to natural gas one are maintained, EDF will cash record profits, to the level of the current losses.

Germany, to the contrary, will continue to suffer very high costs resulting from the breakout of its Russian supplies, which, them, will last and which has justified the 200 billion euros plan announced by Berlin. The German industry competitiveness will be durably affected. Another threat, the European decision to totally convert the car industry in the production of electric vehicles before 2035, when thermal engines cars sales will be forbidden. This sector is at the heart of the success of the German industry, generates huge trades surplus and is essential for the country prosperity. But that transformation will be painful because facing a double threat.

The Chinese car manufacturers have an indisputable lead. They prove it at the Paris Saloon where Great Wall and BYD have exhibited their models. They benefit from their local market which represents more than ten million registrations every year. German car producers still today take up a market share whwich is essential for their financial results but that share is going to fall due to the increase of the electric vehicles share produced by Chinese companies. That will harm the German groups results and their ability to finance the investments necessary to develop this new motorization mode.

At this pressure will be added the dependance for commodities and components supply indispensable for battery production. Germany has not at its disposal on its territory any rare earths or special metals deposits as lithium or cobalt. So the German car industry health is threatened both by the Chinese models competition and by its obligation to supply it outside, and mainly from China, to produce its vehicles.

The answer could be, at the European level as that has just be done in the U.S., to set trade barriers targeting Beijing. But Germany will hesitate to support such a policy because China is both a strategic supplier and its second export market. Berlin is afraid to have more to lose than to win. So German leaders will be confronted with dilemma difficult to overcome. It will not be possible to be more and more integrated in the Western part of the world and to depend from Russia for its energy supply and from China for its industry prosperity.

World has changed and the German leaders must admit it and draw all consequences on their economic policy and on positions they will defend in Brussels. The first domain and the most urgent one is the energy one. A strategic revision is indispensable with the recognition that nuclear can contribute to the independence and to the competitiveness of the State-members. The adoption of a European Power Safety Pact which would include that kind of electricity production is necessary and must have Germany support.

The second domain regards State interventions and the drawing up of indispensable protections to provide competitiveness and especially the survival of full sector of the European industry. The time of the free and unbiased competition is over because none country outside of Europe respects this principle. Mergers between enterprises when that allows to cope with outside competitors must now be admitted. Germany must use its whole influence toward the Commission in order that Brussels does not oppose it in the name of an obsolete principle.

Germany weakening is a reality and the country cannot anymore pretend to impose its choices and to give lessons to its partners. To the contrary it needs them to rebound. If it becomes aware of that, it will be the first to benefit from it.