People look at the banking district skyline with the Commerzbank building (2ndR) during sunset in Frankfurt am Main, western Germany, on September 25, 2023. (Photo by Kirill KUDRYAVTSEV / AFP) (Photo by KIRILL KUDRYAVTSEV/AFP via Getty Images)
Kirill Kudryavtsev | Afp | Getty Images
Germany’s Central Bank President, Joachim Nagel, refutes the notion that Germany is the sick man of Europe in an interview with CNBC. He acknowledges that growth for this year is not good, but emphasizes the structural changes needed. Nagel compares the current economic situation to the period when Germany was previously referred to as the sick man after reunification. He highlights that despite the challenges, Germany is still operating at full employment in the labor market. Nagel asserts that Germany is not the sick man of Europe and expresses confidence in the return of economic growth next year.
The debate on whether Germany should be labeled the sick man of Europe has reignited with the prediction that Germany’s economy will be the only major European economy to contract in 2023. Nagel acknowledges the contraction but remains optimistic, stating that growth will bounce back next year.
The Bundesbank projects that Germany’s economy will experience a 1.2% growth next year, following a 0.3% decline in 2023. The International Monetary Fund (IMF) holds a slightly more pessimistic view, estimating a 0.9% growth for Germany in 2024. The IMF’s growth forecast for Germany is lower than the average of 1.2% for the wider euro zone.
Inflation beast is ‘tamed’
In September, Germany witnessed a slower-than-expected rise in prices, with harmonized inflation at 4.3% compared to the previous year. This is the lowest monthly figure since Russia’s invasion of Ukraine, primarily due to a below-average increase in energy prices. Nagel believes that the country is moving in the right direction in terms of inflation, stating that “the beast is still there, but, to a certain extent, we have tamed it.” Despite this progress, inflation remains above the euro zone’s 2% target and is expected to persist at elevated levels for the next few years according to the Bundesbank.
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