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German industry’s best days are behind it

A car production line in Ingolstadt, Germany. Andreas Gebert/Getty

Germany’s biggest companies are “ditching the fatherland”, says Matthew Karnitschnig in Politico. Chemical giant BASF, a pillar of German business for more than a century, has become increasingly worried about its home market. Bosses have decided to abandon the firm’s Rhine-side location for a new $10bn state-of-the-art complex in China. It’s a sign of the malaise spreading through the whole German economy – a harbinger of what could be a “fundamental reversal” in the country’s fortunes. Confronted by a “toxic cocktail” of high energy costs, worker shortages and reams of red tape, massive companies like Volkswagen and Siemens are “experiencing a rude awakening” and moving their plants and offices to rural America and Asia. It’s hard to avoid the conclusion Germany is heading, ever deeper, into economic decline.

Reports from the front line only get worse: unemployment has risen this year by around 200,000; foreign investment is at its lowest since 2013; orders at engineering companies – “long a bellwether of health” – fell 10% in May, their eighth consecutive decline. It’s largely down to the fact Germany’s most important industries, from chemicals to cars, are rooted in 19th-century technology. The country thrived for decades because of these industries but now they’re either becoming obsolete, like the combustion engine, or too expensive to produce domestically. At the same time a failure to support burgeoning industries like AI is prompting successful tech and pharmaceutical companies – like BioNtech, which helped develop the Covid vaccine – to uproot and move to more tech-friendly countries like Britain. So what will Germany’s future success be based on? “So far, there’s nothing in sight.”