Stephan Richter On NPR: Why Germany’s Economic Backbone Is Saying “Auf Wiedersehen”

Germany – once seen as the bedrock of fiscal rectitude – is finding itself on the other side of the ledger. It’s facing a budget crisis amid rising energy costs, urgent calls for immigration reform and more pressing issues. So what is Europe’s largest economy to do?

David Brancaccio:

Stephan, so you think something’s gone wrong in Germany? I mean, it’s Russia that invaded Ukraine, drawing up energy supplies to Germany and shaking European economies. But you think that blaming externalities, as they say, doesn’t tell the whole story?

Stephan Richter:

No David, it doesn’t at all. The problems really started back in 2005, with the famous (and now infamous) Angela Merkel. She basically did nothing for 15 years in government other than to preserve her own power and stay popular with voters by not taking any tough decisions.

And that really has led to a major problem for Germany, because all these problems kept building up. So things are really not good. And Germany today mostly lives off the fumes of its past reputation.

David Brancaccio:

You’re saying that the Merkel administration deferred tough decisions, and now the chickens are coming home to roost?

Stephan Richter:

Correct, but the government that’s now in charge, led by Olaf Scholz, of course, the SPD [Social Democratic Party] was for most of the years when Merkel was in government the junior partner, so they are co-culpable.

And the problem really has been and continues to be that there has been a large consensus to do social spending in Germany and not any infrastructure or other investment – no investment in education, no investment in housing.

And it is the opposite of what people in the United States always think about Germany – that it’s a country that’s planning ahead, that’s using its resources wisely and is trying to make sure that everything works smoothly, and where schools and everything are in good shape. None of the above anymore.

David Brancaccio:

Now, you recently wrote that the country’s economic backbone is, your word was “fleeing” Germany, leaving Germany. Who are these foundational institutions and why are they taking off?

Stephan Richter:

It’s the very big industrial companies that depend on the cost of energy. And mind you, the reason why the Germans were so nice to Putin for so long is that he gave us dirt-cheap energy.

In an economic and markets context, the problem is that was a false positive for Germany, because we are falling out of competitiveness rankings.

If you have a leading industrial country that is dependent on cheap energy in order to excel in world markets, that’s not exactly where you want to have an advanced economy.

And yet, these large companies still are very powerful in politics. They stand in the way of the transformation and restructuring and structural change that needs to happen.

Editor’s note: This interview conducted by David Brancaccio, the host of the Marketplace Morning Report, with The Globalist’s Stephan Richter was broadcast on National Public Radio all across the United States on December 19, 2023. To view this feature on the Marketplace website and listen to the 2:50 minute audio of the interview, click here.