Bad news keeps piling up: after Germany's economy contracted in the last quarter of last year, bleak early outlooks for 2024 signal a host of problems ahead, according to Bloomberg. "Germany is really in trouble," said Brian Mangwiro, fund manager at Barings. "All major manufacturing economies are slowing down, but in Germany, this is exacerbated by higher electricity costs. There are also issues in the automotive sector with competition from China."
At a recent forum in Davos, executives' mood regarding Germany was far from optimistic. According to them, Europe's largest economy has lost its reputation as a stable country and is facing a period of struggle as competition intensifies across industries from engineering to automobiles, including electric vehicles.
"Germany's economic prospects remain bleak," notes a report from the Weil European Distress Index, which points to profitability stagnation and liquidity pressure.
According to Bloomberg News, troubled loans and bonds issued by German companies totaling over $13.6 billion were recognized last month, 13 times higher than Italy's level. This indicates a broader problem: about 15 percent of companies in Germany are currently experiencing difficulties, the highest rate in Europe, according to a report by consulting firm Alvarez & Marsal.
"Difficulties are spreading to other sectors besides real estate, construction and retail, which have suffered from inflation and rising borrowing costs," said Christian Ebner, managing director of the financial restructuring advisory group.According to the supervisory authority, one-third of commercial real estate loans in Germany face higher borrowing costs for three years, which could lead to sharper increases in credit defaults and devaluation.
Germany's uncertain political future also weighs on its economy. Deutsche Bank AG CEO Christian Sewing stated that concerns about the rise of the far-right AfD party are contributing to reduced investment.