Can Germany reinvent its economy?
Germany was once the economic powerhouse of Europe. But since 2019 its economy has barely grown. The country is now under new leadership—but is Friedrich Merz the man to pull Germany out of its perma-slump?
Hosts: Ethan Wu and Mike Bird. Guests: The Economist 's Christian Odendahl; Monika Schnitzer, chair of the German Council of Economic Experts; and Philippa Sigl-Glöckner, founder of Dezernat Zukunft, a macro-finance think tank.
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The Guardian
2 hours ago
- The Guardian
Germany urgently needs to attract migrant workers – it just doesn't want them to feel welcome
Friedrich Merz's government has sent a clear message to anyone thinking about coming to live in Germany: don't. Yet its message to those who want to come to Germany to work is: we need you. This might sound like a contradiction, but it is a revival of the thinking that drove the 'guest worker' programme of the postwar boom years. Between 1955 and 1973, West Germany sought to rebuild its economy by attracting labour, mainly from Turkey but also from Italy, Portugal and Yugoslavia. Yet it did so without giving much consideration to the human needs of the people coming. Repeating that experiment, and the social tensions it created, at this moment would be even worse. The Wirtschaftswunder (economic miracle) fuelled record growth and labour shortages. Now, Germany's economy is in recession, but it desperately needs people to fulfil basic public services. Above all, it needs them to help finance its mounting pensions bill. Given that Germany has also become ground zero for Europe's heightened sensitivity around immigration after the backlash that followed Angela Merkel's open-door policy towards Syrian refugees a decade ago, it's worth paying attention to how Berlin navigates the issue. So far, Merz is providing a masterclass in what not to do. On the one hand, the conservative chancellor is fuelling rightwing narratives that suggest migration is a threat to the country. On the other, he speaks as the voice of German business and pleads for more foreign workers. 'We need skilled immigrants as drivers of progress,' Merz said this month, at a ceremony to honour the contributions of Özlem Türeci and Uğur Şahin – the Turkish immigrants behind Covid vaccine pioneer BioNTech. He added that anti-immigration 'ideologies' were a threat not just to Germany's prosperity 'but even worse, their narrow-mindedness threatens the future of our liberal order'. But his government has sent exactly the kind of signal he claims to decry. Germany has continued with a new policy of rejecting asylum seekers at its borders, despite a court order calling it unlawful and a violation of EU law. The border rejections standoff comes despite a dramatic decline in refugees – up to April 2025, the figures were down by nearly half from the previous year. Another leg of Merz's anti-migration strategy is to put an end to 'turbo naturalisation', which allows newcomers the opportunity to apply for a German passport after as little as three years in select cases. The official justification is that ending fast-track citizenship will eliminate a 'pull factor' and reduce illegal migration. But obtaining citizenship and skirting migration rules have nothing to do with one another. Crossing the border as an irregular migrant can be an act of desperation, and at times opportunism. Getting a German passport requires legal residency at the very least, but also involves various hurdles and a significant amount of paperwork. The fast-track procedure is even more discretionary and reserved for people that exhibit 'exceptional integration efforts', such as speaking German at an advanced level, consistently paying taxes and taking part in the community, for example by volunteering at local charities or sports clubs. Eliminating that route, which only opened in June 2024, will have very little impact. Last year – when a rush to take advantage of the new process might have been expected – only about 7% of people receiving German citizenship had an accelerated application, according to federal statistics agency Destatis. But Merz's moves reinforce the narrative that Germany is being overwhelmed by newcomers. The approach bolsters the far-right AfD – a close second in the polls – which has called for the deportation of thousands of people, including some with migrant backgrounds who hold German citizenship. Controlling entry is legitimate, but such grandstanding policies fuel xenophobic sentiment and don't allay the worries of anxious citizens. Also, the political dividends are limited. Sign up to This is Europe The most pressing stories and debates for Europeans – from identity to economics to the environment after newsletter promotion While the fevered discussion around migration has kept it as the top issue for Germans, only 38% of people ranked it as one of their three main concerns, which is four percentage points lower than in April, according to an Ipsos survey. Economic concerns such as inflation and poverty/inequality are the other top concerns. The harder-to-face reality is that Germany could use all the help it can get. With older Germans heading into retirement by the millions over the coming decade, the country must welcome a net 400,000 newcomers each year to keep things balanced and shoulder the rising cost of pensions. But this isn't the postwar era, where Germany can sign agreements with poorer countries and expect thousands to arrive. There's global competition for qualified workers, and Germany is at a disadvantage because of its language and its reputation for being unwelcoming. That's a legacy from the mismanaged Gastarbeiter (guest worker) programme, when Germany had neither a plan for how to integrate the people it lured for work, nor the desire to do so. It also reflects a national identity left narrow and underdeveloped due to its Nazi past. The former footballer Mesut Özil, born in 1988 to a Turkish guest-worker family in Germany's Ruhr Valley, never felt fully accepted. Though he played a starring role in Germany's 2014 World Cup win, he said: 'When we win, I'm German; when we lose, I'm a foreigner.' His story shows how acceptance is out of reach for many. And it's not isolated. According to a recent study by the Friedrich Ebert Foundation, between 2015 and 2022, 12 million people migrated to Germany. The study also said that, in the same period, more than 7 million migrants left again. The main reasons were difficulties feeling part of German society. The next blow could be looming. According to a study by Germany's Institute for Employment Research, a quarter of migrants in the country – around 2.6 million people – are considering packing up and leaving. Germany's self-imposed isolation will lead to a slow erosion of the labour force unless it is urgently addressed. Revising the narrative around migration to recast it as part of the solution would be a good starting point. But the political class hardly looks ready. As Markus Söder, the conservative premier of Bavaria, recently told the rightwing media outlet NiUS: 'Of course we need immigration– unfortunately.' Chris Reiter and Will Wilkes are the co-authors of Broken Republik: The Inside Story of Germany's Descent Into Crisis. Both cover Germany from Berlin and Frankfurt, respectively, for Bloomberg News
Reuters
7 hours ago
- Reuters
Germany's Merz urges 'quick and simple' EU-US trade deal
BRUSSELS, June 26 (Reuters) - German Chancellor Friedrich Merz said on Thursday the EU should do a "quick and simple" trade deal with the United States rather than a "slow and complicated" one. Merz spoke at the end of a summit of EU leaders in Brussels, where European Commission President Ursula von der Leyen said the EU had received a new proposal from U.S. President Donald Trump's administration in their transatlantic trade dispute. With the clock ticking before a tariff respite expires on July 9, Merz said time was of the essence. "We have less than two weeks until July 9 and you can't agree a sophisticated trade agreement in that time," he told reporters. Merz said German industries such as chemicals, pharmaceuticals, mechanical engineering, steel, aluminum and cars were already being burdened with high tariffs that businesses were in danger. Merz also said von der Leyen had suggested that Europeans build a new trade organisation that could gradually replace the World Trade Organization (WTO), which has struggled to function effectively in recent years. He said the idea was in its early stages but could include mechanisms to resolve disputes, as the WTO was meant to do. "You all know that the WTO doesn't work any more," he said. Also on trade, Merz said EU leaders were "basically united" in wanting to finalise a trade deal with Latin America's Mercosur bloc as soon as possible. He said there were only "small differences" between EU members on the pact. Asked about objections from France to the current proposal, Merz said he had spoken twice to French President Emmanuel Macron about the topic twice during the summit and felt there was "great readiness" to conclude the deal. Macron, however, struck a different note, telling reporters France could not accept the deal as it stands.
Economist
13 hours ago
- Economist
Will AI eat the advertising industry?
Mark Zuckerberg recently shook the advertising world with Meta's plans to allow brands to use AI to generate targeted advertisements on Facebook and Instagram. Importantly, no ad agency would be involved in the process. So is the writing on the wall for the traditional advertising industry? Will the next viral video campaign or earworm jingle be the brainchild of a computer, rather than the fabled advertising creatives celebrated in the TV show Mad Men? And if so, what lessons are there for other creative industries? Hosts: Ethan Wu and Mike Bird. Guests: Sir Martin Sorrell, founder of WPP and S4Capital; Brian Wieser, CEO of Madison and Wall; and The Economist's media editor Tom Wainwright.
