The Eurozone’s industrial powerhouse is dealing with a recession and an energy crisis
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The struggling German economy could once again be called the ‘Sick Man of Europe’ if structural issues are not addressed immediately, Deutsche Bank CEO Christian Sewing has warned.
European countries are often given this label when they experience economic difficulties, social unrest, or impoverishment. Germany received this notorious status in the late 1990s and was described this way into the early 2000s.
“We are not the ‘Sick Man of Europe,’” Sewing said in his address at the Handelsblatt Banken Summit 2023 on Wednesday, “but it is also true that there are structural weaknesses that hold back our economy and prevent it from developing its great potential.”
“We will become the sick man of Europe if we do not address these structural issues now,” he added, identifying the issues as high and unpredictable energy costs, slow internet connections, outdated rail networks, digitalization backlogs, a lack of skilled workers, excessive bureaucracy and long approval procedures.
The EU’s largest economy continues to grapple with challenges in its manufacturing sector as it suffers from higher energy costs. It officially slipped into a technical recession in the first quarter of the year as GDP growth was revised from zero to -0.3%. The Bundesbank announced on Monday that the economy was likely to shrink this quarter thanks to slow private consumption and the increasing weakness of the industry.
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“[We] must not deceive ourselves: We are still lagging behind our international competitors, even if the special economic situation caused by interest rates currently glosses over this somewhat – more for some institutions, less for others,” the Deutsche Bank chief executive said.
According to him, European economies should avoid becoming too dependent on “non-European banks.” The biggest task lies with banks, whose roles are changing as a result of the global shifts, Sewing noted.
“In Europe, we need a framework that gives banks more leeway to lend, facilitates capital market financing and enables Europe-wide growth,” the banker suggested.
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