The chief executive of Deutsche Bank – the largest lender in Germany – has warned that Germany could become the sick person of Europe, if it does not reinvent itself.
Christian Sewing said to an audience in Frankfurt, Germany that the continent’s biggest economy had become complacent following more than a decade strong growth prior to the pandemic.
Mr Sewing said, “We aren’t the sick man of Europe.” It is true, however, that structural flaws are holding back our economy. They prevent it from reaching its full potential. We will be the sick man of Europe, if we don’t address these structural problems now.
Germany’s manufacturing sector has always been strong, but it is now struggling to find cheap energy after Russia invaded Ukraine.
The economy is in recession and has flattened. It is the worst performing G7 country. It is feared that the economy may be facing a double recession.
The OECD (an organisation that represents a majority of rich countries) has predicted Germany as the only G7 economy to shrink by 2023.
Mr Sewing stated that the problems in the world’s fourth-largest economy are well known and have been for many years.
He cited high and unpredictable energy prices, slow internet speeds and outdated rail systems. He said that red tape, backlogs in digitalisation and a lack of skilled workers are also holding growth back.
Mr Sewing said that Germans had become “too comfortable”, after the decade’s success. He also criticized what he termed a “paralysing fear of change”.
He said: “For far too long we have believed that the economy would run itself, and that we didn’t need to do anything to succeed.
We discuss the four-day work week, redistribution and growth. We negate this basic economic principle, that you have to do something in order to get something.
The German economy has grown by only 0.2 percent compared to its pre-pandemic level, indicating that it is far behind the other G7 countries.
Office for National Statistics has recently revised its growth rate to 1.6pc.
The chief of Deutsche Bank warned that foreign investors are increasingly turning away from Germany, which is causing direct damage to the economy.
German automakers are already caught in the middle of a trade dispute between the European Union (EU) and China, which could lead to punitive tariffs.
US Inflation Reduction Act, and its cheaper energy access, threatens to steal further investments away from Europe.
Mr Sewing called for policymakers to reduce red tape in banks and to push for greater EU Integration to combat the economic malaise that his country is facing.
He urged that lenders be allowed to lend more and increase financing on capital markets.
He said, “There is not a single European bank that is globally competitive.”
Mr Sewing warned “globalisation, as we know it, no longer exists”. He suggested that the EU strengthen its internal markets and adopt a common energy and education policies.
He said: “An agenda that gives Europe more autonomy and independence from other countries and regions will be the best way to de-risk in a world filled with conflict and uncertainty.”
His comments follow a report from Deutsche Bank earlier this week that warned of Germany’s likely weaker growth, higher prices and ageing population as a result the shift to net-zero.
The report warned that Germany could lose between 1.6m and 4.8m workers by 2035, depending on the immigration level.
Analysts at the bank stated that growth would be around 0.5pc instead of 1pc over the next few years, while inflation would tend to exceed the 2pc target.
Unicef published a report this week that found young Germans to be among the least happy in Europe. Only Bulgaria ranked higher.