Germany’s economy is in the dumps. Here are the reasons
(Source – The Hindu, International Edition – Page No. – 13)
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Energy Dependence and Crisis
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Germany’s economic model relied on inexpensive natural gas, crucial for its industrial production and exports.
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A major shift occurred when the country phased out nuclear power in 2011 and depended on Russian gas as a bridge.
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When Moscow cut off supplies following the invasion of Ukraine, gas and electricity prices skyrocketed, severely impacting energy-intensive industries like steel, chemicals, and glass manufacturing.
Transition to Renewable Energy
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The move away from nuclear and coal toward renewable energy was not fast enough.
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Resistance to wind turbines from homeowners and local communities delayed the growth of renewable energy sources.
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Infrastructure for alternative fuels, such as hydrogen for industrial use, remains mostly undeveloped, leaving a significant energy gap.
Competition from China
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For years, German industries thrived on exports to a booming Chinese market.
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However, state-subsidized Chinese companies have now entered the same industrial sectors, producing machinery, solar panels, and vehicles.
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This competition has reduced Germany’s export dominance and dramatically cut its net vehicle exports.
Delayed Investments and Labor Shortages
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During prosperous times, Germany postponed investments in long-term projects like rail lines and high-speed internet.
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Companies face significant labor shortages, with many reporting difficulties in filling skilled positions.
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Excessive bureaucracy and lengthy approval procedures further hinder economic growth.
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Practice Question: Analyze the factors contributing to Germany’s economic stagnation in recent years. What lessons can India draw from Germany’s economic challenges for its own growth trajectory? (150 Words /10 marks) |
