The eurozone’s problem country: Germany (2024)

FAQs

How has the euro affected Germany? ›

As I have explained, the introduction of the euro has had many healthy effects on the German economy. On the one hand, Germany is profiting to a considerable extent from the integration of financial markets. Enterprises now have access to a broader and deeper capital market in their domestic currency.

By far, the largest drawback of the euro is a single monetary policy that often does not fit local economic conditions. It is common for parts of the EU to be prospering, with high growth and low unemployment. In contrast, others suffer from prolonged economic downturns and high unemployment.

Germany's Real Challenges are Aging, Underinvestment, and Too Much Red Tape. Germany is struggling. It was the only G7 economy to shrink last year and is set to be the group's slowest-growing economy again this year, according to our latest projections. Some pundits say Germany's economic model is irreparably broken.

The European sovereign debt crisis resulted from the structural problem of the eurozone and a combination of complex factors, including the globalisation of finance; easy credit conditions during the 2002–2008 period that encouraged high-risk lending and borrowing practices; the 2008 global financial crisis; ...

You can use the euro in 20 EU countries: Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.

Germany is a founding member of the European Union and one of the first countries to adopt the euro on 1 January 1999.

The euro has eliminated the costs of exchange rate fluctuations within the euro area. This protects consumers and businesses within the euro area from costly swings in currency markets, which, in some countries, used to undermine confidence, discourage investment and cause economic instability.

The solutions range from tighter fiscal union, the issuing of Eurozone bonds to debt write-offs, each of which has both financial and political implications, meaning no solution has found favour with all parties involved.

The ECB has successfully achieved its primary goal of price stability and the common currency is popular among the euro area's citizens. This popularity has made the euro more resilient than many people thought possible twenty years ago.

Economic activity in Germany is estimated to have contracted by 0.3% in 2023, as projected in autumn. Private consumption suffered from a loss in purchasing power. High building and borrowing costs on top of labour shortages and elevated energy prices depressed investment in construction and energy-intensive sectors.

What's happening in Germany in 2024? ›

In 2024, Berlin will be in focus throughout Europe: The German capital is going to celebrate two charismatic events. In summer, the Olympic Stadium will host five matches and the final of the UEFA European Championship 2024. And autumn 2024 will be all about the 35th anniversary of the fall of the Berlin Wall.

In addition to high labour and energy costs, the German economy is mainly affected by weak global demand for cyclical goods such as cars, machines and chemicals.

Though the overall debt amount increased, the ratio of debt to GDP decreased 2 percentage points between the third quarters of 2022 and 2023. At 165%, Greece reported the highest ratio of debt to GDP in the EU, followed by Italy. France, Spain, Belgium and Portugal also reported debts greater than their national GDP.

Over the course of 2023, the European economy saw close to zero growth. The continent's two largest national economies—Germany and the U.K.—may both be in recession. Flagship European companies such as Volkswagen, Nokia, and UBS have collectively announced tens of thousands of layoffs.

The eurozone is the unofficial name for the 20 EU countries that are members of the European Economic and Monetary Union (EMU) and have adopted the euro as their common currency.

The euro has eliminated the costs of exchange rate fluctuations within the euro area. This protects consumers and businesses within the euro area from costly swings in currency markets, which, in some countries, used to undermine confidence, discourage investment and cause economic instability.

Europe's biggest economy has continued to shrink amid crises, inflation and lacking investment. Economists have warned the outlook for 2024 does not look much better.

A new study by the Centre of European Policy shows that the euro has resulted in both economic highs and lows. Germany benefited the most from the currency, gaining €1.9 trillion, while The Netherlands saw the second highest return at €346 billion.

The rapid advance to industrial maturity led to a drastic shift in Germany's economic situation – from a rural economy into a major exporter of finished goods. The ratio of the finished product to total exports jumped from 38% in 1872 to 63% in 1912. By 1913 Germany had come to dominate all the European markets.