Economic stagnation impacts voter turnout.

(CLO) Ahead of the February 23rd election, many German voters are expressing concerns about the stagnant and declining state of the economy in many aspects, and they have good reason to do so.

The German economy is in recession, having recorded two consecutive years of decline. Currently, its size is only about the same as in 2019, while many other advanced economies have experienced a solid recovery.

Three factors that lead to economic stagnation.

For many voters who have experienced a period of stagnant real incomes, the bleak economic outlook only fuels further pessimism, with predictions of continued real income declines. There are several reasons for this, but three main factors are hindering the recovery of the German economy.

The first factor is a tight fiscal policy. Germany maintains high tax rates and lower public spending than many other countries due to a constitutional "debt brake," which only allows budget deficits in emergencies.

Previously, this rule had been relaxed during the COVID-19 pandemic. However, when debate arose over whether to impose a new state of emergency to increase borrowing amid the Ukraine crisis, Germany's coalition government collapsed.

This has kept the fiscal deficit at a moderate level, while many argue that increasing the deficit could boost economic growth.

The second factor is the decline in foreign demand. For decades, Germany benefited greatly from global economic integration, particularly from China. Asia's largest economy was once heavily reliant on German machinery and automobiles. However, as it approached technological frontiers, China reduced its demand for imports from Germany, weakening this crucial growth driver.

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But if Germany's economic recession were solely due to decreased demand, prices should have fallen. Yet, in reality, prices have continued to rise sharply.

Illustration photo: Unsplash

Inflation in Germany has remained high for the past few years and is not significantly lower than in the US or the eurozone. Over the next 12 months, German households anticipate inflation to be above 3%, significantly higher than the European Central Bank's 2% target.

Furthermore, unemployment in Germany remains lower than in most European countries and is not significantly higher than in 2019. This suggests that a demand shortfall is not the primary cause of the stagnation. Instead, supply-side issues, including lower earnings forecasts and high inflation, are the key factors.

Three-dimensional economic crisis

Germany is currently facing a three-dimensional crisis in terms of supply: high energy prices, a shrinking workforce, and low productivity growth.

Energy prices have risen sharply since the Russia-Ukraine conflict, particularly impacting Germany due to its heavy reliance on Russian gas. The outgoing government, with the Green Party playing a key role, has accelerated the transition to green energy, further increasing costs. Alongside the costs imposed by the European emissions trading system, this adds an extra burden to the economy.

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Regarding the workforce, hourly labor productivity in Germany is growing weakly, similar to the UK. The decline in working hours may be related to demographic changes, inefficient immigration, or shifts in labor preferences following COVID-19.

Low productivity growth is also a major problem. While GDP per hour worked in the US has increased by more than 10% in recent years, Germany and the UK have lagged behind. This could be due to outdated infrastructure, low private investment, a lack of startups, and few companies developing into large corporations.

Therefore, while immigration is attracting the attention of German voters ahead of the election, the economic situation will remain the most important factor reflecting the mood of the nation.

Ngoc Anh (according to The Conversation, DW)

Source: https://www.congluan.vn/bau-cu-duc-2025-con-1-ngay-nen-kinh-te-tri-tre-tac-dong-den-la-phieu-cu-tri-post335618.html