Germany, barometer of Belgium – Trends-Tendances on PC
The German economy held up better this winter. Divergent expectations for 2023. One certainty: the good health of our neighbor is vital for us. And his model can inspire us.
The Belgian economy is highly dependent on the German economy. When the sun shines in Berlin and the Ruhr area, smiles shine through our companies. Paradoxically, the German model is not always successful with French-speaking politicians, even if Paul Magnette, president of the PS, had recommended in 2010 a… attachment of Wallonia to Germany, a formula rather tinged with spite at the expected from Flanders so much enthusiasm for our neighbor to the east. The energy shock following Russia’s aggression in Ukraine has amplified these resentments. Germany’s reliance on Russian gas has been reviled. The dull threat of a sharp decline by our neighbors has made our leaders and manufacturers shudder. Among the collateral damage of this geopolitical earthquake, Germany’s economic future would be damaged, at least in the short term.
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The Belgian economy is highly dependent on the German economy. When the sun shines in Berlin and the Ruhr area, smiles shine through our companies. Paradoxically, the German model is not always successful with French-speaking politicians, even if Paul Magnette, president of the PS, had recommended in 2010 a… attachment of Wallonia to Germany, a formula rather tinged with spite at the expected from Flanders so much enthusiasm for our neighbor to the east. The energy shock following Russia’s aggression in Ukraine has amplified these resentments. Germany’s reliance on Russian gas has been reviled. The dull threat of a sharp decline by our neighbors has made our leaders and manufacturers shudder. Among the collateral damage of this geopolitical earthquake, Germany’s economic future would be damaged, at least in the short term. Or, since mid-December, statements have shown greater resilience announced by the German economy. We are no longer talking about backsliding but about stagnation for 2023. The local industry, highly energy-intensive, is reinventing itself faster than expected, the morale of the bosses is rising again and the dynamism of the economy is now based on other pillars: services, research, new technologies… This is good news for Belgium and proof that this difficult period can be overcome. A source of inspiration, too? “It’s not forced optimism, underlines Etienne de Callataÿ, co-founder and chief economist of Orcadia Asset Management. It corresponds to a reality: Germany is doing better than expected. It also testifies to the fact that behind information, it is certainly not necessary to hide the bad news but also to see the good ones. For Belgium, it is rather a relief because we are, overall, a subcontractor of Germany each.” This country of 82 million inhabitants is Belgium’s leading economic partner and Wallonia’s second, recalls the Walloon Export and Foreign Investment Agency (Awex). “For Germany, the explosion in energy prices was bad news because of its dependence on Russian gas, recalls Etienne de Callataÿ, but also because of the weight of industry: the sector manufacturing still represents a quarter of the economy. Finally, the dark scenario that some imagined did not take place. react and accelerate the energy transition.” The Scholz government has decided on a 200 billion euro plan to support its economy. It redirected its energy ties and extended coal and nuclear to become independent of Russia while betting on hydrogen. Energy-intensive industry has reduced its production. But this drop was something that was desirable to save gas, explains to World Oliver Falck, of the German Institute for Economic Research (Ifo): “It seems that certain large groups are using the current crisis to justify a divestment they’ve actually been doing for years because of the energy transition, including a cost.” “This inflation crisis imposes clear choices, continues Etienne de Callataÿ. Economists talk about creator of destruction. It’s a violent expression, it’s true: you have to be perverse like an economist to see something positive in it. But the economy needs corporate bankruptcies like a forest needs dead trees.Some of the inflation also comes from consumers changing their behaviors, while businesses adapt. : the economy needs change!” The economist Bruno Colmant, professor at ULB and UCLouvain, insists on the very foundations of the German system which have enabled the country to show resilience. And who could inspire Belgium even if the model, of Protestant essence, is difficult to transpose. “Germany has effectively maintained a very high level of industrialization with a sector which still represents 23% of GDP, against 10% in France and 17% here, and it has suffered from high energy costs, underlines- But its asset is this Mittelstand set up over time, this network of large and small companies with unique and most often family ownership and governance. Three characteristics distinguish this Mittelstand: the business owner exercises personal decision-making influence, he assumes risk management and the business is financially autonomous. “In the German model, liberalism and entrepreneurship are accompanied by great cooperation and a typically Protestant community vision, continues Bruno Colmant. We pool research and development.” The country is also based on the famous “ordoliberalism”, a current of liberal thought according to which the economic mission of the State is to create and maintain a normative framework allowing “free and undistorted competition” between companies. “This country of Protestant essence favors the competitiveness of companies over the well-being of households, underlines the economist again. It is a bit like the American trickle-down (a trickle-down theory according to which the enrichment of the most wealth makes it possible to feed the economy, Editor’s note). This logic no doubt makes them more malleable in dealing with crises. The community supports development. This is not always required, virtuous on the social level. Ordoliberalism was also at the origin of the major reforms of the labor market about twenty years ago, under the aegis of Peter Hartz, director of personnel at Volkswagen. competitiveness is not equally shared prosperity.” This is what had cooled Paul Magnette, president of the PS, who had evoked in 2010, in a provocative way, the idea of a “attachment of Wallonia to Germany”, but he had not insisted as long as it referred precisely to this flexibility of work. “Although it has a large border with this country, Wallonia may not be inspired by this German model, says Bruno Colmant. The links are much more natural with Flanders: ordoliberalism finds more of its place there. ” “Germany has resisted much better than expected and the regression this winter is less severe than announced after the big fears of last summer, it’s true, agrees Carsten Brzeski, chief economist of ING Germany. But sharply divergent views on recovery prospects for 2023.” According to this connoisseur of the German economy, this precisely testifies to the ambiguity of the model. “If the regression was less significant than expected, it is also due to the luck factor, thanks to the mild weather which made it possible to maintain the price of energy at a reasonable level, he explains. Public support decision by the government has also played an important role. Does the German model also allow for more resilience? It is true that this network of the economy makes it possible to cushion the shock of the crisis thanks to great responsibility and a united approach. But while some draw the conclusion that the German economy should begin a rapid recovery in 2023, Carsten Brzeski is becoming more and more cautious: “The recovery of the economy is likely to be much more difficult. If we take industrial production, for example, we are today still 5% below the level of the 1999 pandemic. Energy-intensive companies have lost 13% of their activity, it is all the more worrying that one can having higher energy prices than before due to the war in Ukraine and the energy transition. The post-pandemic recovery fueled demand in 2022, but this effect is expected to subside in 2023.” In short, in Germany as in all of Europe, many signals remain dark orange. The ING Germany economist also points out that the current geopolitical shock should lead to a slowdown in globalization and a reduction in world trade. “This means that it will be necessary to repatriate productions at the national level. This may be good news, in the long term, but in the short term it means significant investments and the need to rebuild a supply chain. It is necessary. ” Or, this is where the German model, virtuous in the face of storms or when the situation is optimal, becomes less efficient, according to him. “It’s not an ideal model for rapid change. We often refer to the reforms initiated by Peter Hartz during the Schröder era, but for the past fifteen years there has been no major reform. there is a lack of digitalization, infrastructure, investment…” Chancellor Angela Merkel’s management is often criticized for being too economically conservative. Germany would be, basically, at a turning point. “The local industry is not in decline but in transition, it is going towards a more intensive model in knowledge”, underlines Oliver Falck (Ifo). “The crisis has served as an accelerator, there is much stronger pressure on the technologies of the future, explained to World Helmut Schönenberger, director of the start-up incubator at the University of Munich. , Belgium will have to follow this with a very attentive eye in 2023. “Perhaps we should change our benchmarking and pay more particular attention to Germany”, believes Bruno Colmant. Because our neighbor is indeed our economic barometer.