On 12 February 2025, the Rafael del Pino Foundation organised the dialogue ".Has the German economic miracle come to an end?"The event will be attended by Wolfgang Münchau y Miguel Otero Iglesias on the occasion of the publication of the latest book by Wolfgang Münchau "Kaput. The end of the German miracle" published by Plataforma Editorial.
Wolfgang Münchauis the founder of Eurointelligence. He began his journalistic career at The Times in London and later became a correspondent for the Financial Times, where he co-founded Financial Times Deutschland. He is considered one of the world's leading experts on the eurozone, which he has analysed and described in several works, including "The Meltdown Years: The Unfolding of the Global Economic Crisis", recognised with the prestigious GetAbstract award, and "Kaput, the End of the German Miracle" in which he analyses the weaknesses of the German economy. He is a columnist for the political and cultural magazine New Statesman in London and writes a weekly column on European affairs for El País, Corriere della Sera and Handelsblatt. In 1989 he received the Wincott Award for best young journalist of the year and in 2012 the SABEW Award for best international columnist.
Miguel Otero Iglesias is a Senior Research Fellow at the Elcano Royal Institute and Professor at the IE School of Global and Public Affairs. He is also a research associate at the Institute for the European Union and Asia at the ESSCA School of Management in Paris. Previously he was Senior Lecturer in International Political Economy at ESSCA Paris, Adjunct Professor at Queen Elizabeth House, University of Oxford, Postdoctoral Research Fellow at the London School of Economics and Associate Professor at Oxford Brookes University, where he obtained his PhD in International Political Economy (IPE). He also holds an MSc in IPE from the University of Manchester and has been a visiting researcher at the Institute of International Relations at the Pontifical Catholic University of Rio de Janeiro, the Institute of World Economics and Politics at the Chinese Academy of Social Sciences in Beijing, the Alfaisal University Business School in Riyadh and the Mercator Institute for China Studies (MERICS) in Berlin. He is founder and coordinator of the European Think Tank Network on China (ETNC).
Summary:
The 12 February 2025the Rafael del Pino Foundation organised the dialogue "Has the German economic miracle come to an end?" with Wolfgang Münchau y Miguel Otero Iglesiason the occasion of the publication of the book Kaput. The end of the German miracle. During the conversation, the causes of Germany's economic stagnation, strategic mistakes in energy and digitalisation and the rise of the far right were discussed..
The decline of the German economic model
Germany's economic model, based on heavy industry, exports and fiscal discipline, is in crisis. Münchau explained that the current problems stem from the reunification of Germany in 1990, when economic policies favoured West German interests to the detriment of the East. Economic integration was not progressive, but rather imposed wages and conditions equivalent to those in the West, leading to the collapse of many local industries and a dependence on public transfers.
Another major problem is the financial system. Unlike other countries that have encouraged venture capital and investment in new technologies, Germany is still dominated by public banks and savings banks that mainly finance traditional industry. This model has prevented the development of a robust entrepreneurial ecosystem and has left the country lagging behind in key sectors such as artificial intelligence, digitalisation and the energy transition.
Energy dependence and strategic mistakes
One of the central themes of the debate was Germany's energy policy. Since the early 2000s, Germany had been banking on increased dependence on Russian gas, believing that trade would strengthen political relations and ensure stability. However, this strategy turned out to be a serious miscalculation, as it left the country in a vulnerable position after the invasion of Ukraine.
The closure of nuclear power plants, accelerated by Angela Merkel's government after the Fukushima disaster in 2011, further aggravated the situation. By eliminating a stable energy source without a viable alternative, Germany was forced to rely on fossil fuels and more expensive energy imports, affecting the competitiveness of its industry.
In the automotive sector, Germany has lagged behind in the transition to electric vehicles. Although it is the second largest producer of electric cars in the world, a lack of investment in software and batteries has meant that German companies have lost competitiveness to China and the United States. German brands have focused on high-end models, leaving aside the affordable electric car segment, where Chinese manufacturers have taken the lead.
Political factors and the rise of the far right
The rise of the far-right party AfD is one of the big alarm bells in German politics. Unlike previous crises, when the protest vote was limited to specific sectors, support for the AfD has spread to all generations, including young people. In the former East Germany, the party has managed to become the most voted force in many regions, reflecting dissatisfaction with economic management and the perception that the state has failed to provide stability.
One of the issues that has fuelled the AfD's growth is immigration. In the German political debate, the migration issue has taken centre stage, even displacing the economy. Friedrich Merz, leader of the CDU and possible next chancellor, has made immigration his main political banner, suggesting that the next government might focus more on this issue than on tackling necessary economic reforms.
European challenges and Germany's role in the EU
Germany faces a dilemma in its role within the European Union. Münchau emphasised that the country needs a capital markets union and a fiscal union to boost investment in strategic sectors, but a Friedrich Merz-led government is unlikely to push for this. Germany has historically been reluctant to mutualise debt and European fiscal integration, which has made it difficult to create a common EU industrial policy.
One of the most uncertain scenarios is the impact of Donald Trump's re-election on the transatlantic relationship. In his first term, Trump has already shown his disinterest in the US role in Europe's defence, and in a second term he could push even harder for European countries to take on more military spending. This would put Germany in a difficult situation, as its defence spending remains below 2% of GDP and there is no political consensus on how to increase the budget without affecting other items.
The big challenge for Germany will be to define its relationship with France within the EU. If Merz comes to power in 2025, it would coincide with Macron's last two years in the French presidency. The two leaders have different views on European integration: while Macron has advocated greater fiscal integration and a more active EU role in industry, Germany has been more cautious on these issues. The relationship between Berlin and Paris will be key in determining whether Europe moves towards greater strategic autonomy or remains dependent on the US and intergovernmental agreements.
Germany is at a turning point. After decades of success based on industry and exports, the country is facing a structural crisis that calls its economic model into question. Digitalisation problems, energy dependence, lack of investment in innovation and the rise of the far right have undermined confidence in the country's future.
The central question remains whether Germany will be able to adapt to the challenges of the 21st century or whether it will remain trapped in a declining industrial model. Without a profound transformation, Germany's economic miracle could be definitively over.
The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of their authors.
The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.
