Joachim Nagel: Structural challenges for the German economy
Speech by Dr Joachim Nagel, President of the Deutsche Bundesbank, at the 79th Monetary Workshop, Darmstadt, 8 May 2025.
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1 Introduction
Dear Monetary Workshop participants, dear ladies and gentlemen,
I am delighted to be with you today. Glancing at the programme, I see that you have already been having intense discussions about Germany's reorientation today – and from very different perspectives at that.
The title of the workshop – which I assume is a deliberate slight
exaggeration – asks whether Germany's economic model is in trouble. I wouldn't go that far just yet.
But one thing is certainly clear: the German economy is facing major challenges. I would like to take the opportunity to discuss these challenges, and potential solutions, with you today.
2 German economic growth under pressure
Before we discuss solutions, let's get a better idea of where we currently stand. Economic growth in Germany has been weak in past years. The German growth engine was beginning to sputter as early as the end of the 2010s.
One significant reason for this was the loss of competitiveness of German enterprises in the international markets. In recent years, this has been reflected in a significant decline in export market shares.
According to Bundesbank estimates, around three-quarters of this decline is due to decreased competitiveness. This applies across two dimensions: some products are becoming relatively more expensive, while by contrast, others are not performing as well.
In addition, many German enterprises specialise in products for which global demand has recently been weak. The automotive industry is a key example of this. Accordingly, the German export goods mix, which has been a recipe for success for decades now, has also recently contributed to the decline in market shares.