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GERMANY IS ONCE again being talked about as the sick man of Europe. Whilst The Economist—with the courtesy of the British—appended a question mark, some Germans are in full Angst mode, shouting it in capital letters with exclamation marks.
This doesn’t match reality, and the wailing doesn’t solve anything. A closer look suggests the economy isn’t sick—just slightly off form. There’s no question that Germany is facing structural challenges: the return of geopolitics and geoeconomics, the transition to climate neutrality, demographic change, and a skills shortage. On top of this there are home-made problems, particularly my country’s ability to tie itself up in red tape. And as an exporting nation, we are especially badly hit when supply chains are disrupted and growth in China softens.
At the same time, the German economy retains a host of strengths. The group of mid-sized manufacturers collectively known as the Mittelstand is innovative and its many “hidden champions” are quiet market leaders. A broad-based industrial sector makes for productive value chains. Our social-market economy maintains its traditions of employer-union co-operation and a powerful welfare state. And sustainable public finances permit the state plenty of options to step in as required.
But what my country did allow itself was a long phase of self-satisfaction, in which...