Germany as an Industrial Location

The German economy is currently in a difficult situation. Germany is the only one of the G7 countries that expects a shrinking gross domestic product in 2023. The Economist magazine asks whether Germany is once again the “sick man of Europe,” similar to in the late 1990s. The end of Russian gas imports through Nord Stream as well as rising energy prices have prompted energy-intensive industries in Germany to scale back production. Several companies want to relocate sites to countries with lower energy prices. All this has led to a debate about whether Germany is under threat from deindustrialization. This debate raises several questions. First, it needs to be clarified whether the problems are temporary or permanent. If the difficulties of German industry were solely a result of current crises, one might hope that it is only a dip and not a threat of permanent deindustrialization. Second, highly developed economies have been undergoing a structural shift for some time now – away from industrial production toward services. This raises the question of whether deindustrialization would be detrimental at all. Third, it needs to be clarified what contribution economic and fiscal policy can and should make to prevent undesirable deindustrialization.