Germany, Europe’s largest economic system as soon as hailed because the continent’s unshakable financial titan, is stumbling via a interval of political turmoil and financial stagnation that feels extra like a midlife disaster than a nasty quarter. In the meantime, Greece, the previous poster youngster for fiscal irresponsibility, is strutting onto the worldwide stage with newfound confidence. Greece was Europe’s punching bag not way back, a “sick man” wheezing underneath the load of debt, painful recessions and excessive unemployment. On the time, Germany supplied much-needed fiscal assist, however not with out a great deal of finger-wagging on correct financial coverage. At the moment, Greece is among the area’s fastest-growing economies and its Germany that will want to vary its playbook.
Germany: A Titan Stumbles
Germany’s GDP is steadily ebbing away. After shrinking 0.3 % in 2023, the economic system is forecast to shrink one other 0.2 % in 2024. This might mark its second consecutive 12 months of contraction—a dismal flip for a nation accustomed to regular pre-pandemic progress charges of round 2 % yearly. In 2023, it held the doubtful honor of being the one G7 economic system to shrink, whereas even the broader European Union eked out a 0.6 % progress price. After all, the short-term elements are well-documented: power costs spiked after Russia’s invasion of Ukraine, inflation soared into double digits, and industrial output sagged underneath the load of excessive rates of interest. Inflation has since dropped to a manageable 2 %, however client confidence hasn’t rebounded.
However Germany’s woes aren’t nearly dangerous timing—they’re structural. The nation boasts the fastest-declining working-age inhabitants within the G7, and a bureaucratic quagmire stifles entrepreneurship. Beginning a enterprise in Germany takes an eye-watering 120 days, greater than double the OECD common. The federal government’s digital providers are equally behind the instances, with a paltry 43 % of varieties pre-filled for companies—properly under the EU common of 68 %. Add to that continual underinvestment in public infrastructure, decrease even than america, and you’ve got a recipe for stagnation that no quantity of German effectivity can repair.
Greece: The Comeback Child
On the opposite facet of the Aegean, Greece is basking in its glow-up. Rising at a mean of 5.3 % yearly since 2021, the Greek economic system is projected to broaden by one other 2.3 % in 2024. In 2023, it grew at thrice the Eurozone common. For a rustic that when epitomized financial dysfunction, these numbers are nothing wanting miraculous. Unemployment peaked at a soul-crushing 28 % in 2013 and has fallen to a still-high-but-manageable 10.9 %. Overseas funding is pouring in, hitting $7.3 billion in 2023. Greek sovereign bonds—downgraded to “junk” standing in the course of the debt disaster—had been upgraded to funding grade final 12 months—a neon signal to international markets that Greece is again in enterprise.
The key sauce of Greece’s restoration is painful however efficient austerity. Between 2000 and 2017, the nation handed 14 austerity packages, slashing pensions and welfare applications whereas jacking up taxes on nearly everybody. The measures had been deeply unpopular—protests had been virtually a nationwide pastime—however they labored. Greece has chipped away at its debt load and rebuilt sufficient fiscal credibility to dream of a brighter future.
The Ironic Reversal
Nonetheless, Germany’s GDP per capita is greater than double Greece’s. Germany boasts extra Fortune 500 firms than some other European nation, whereas Greece has precisely none. However the irony is palpable: Germany, the previous overachiever, is now grappling with stagnation, whereas Greece, as soon as a cautionary story, is writing considered one of Europe’s most surprising success tales. A decade in the past, nobody would have believed this function reversal.
