Germany in August 2020

by Alexander Beard Group, on Aug 26, 2020 10:58:40 AM

A pandemic will not stop at any country, and certainly not at a country that has been one of the most successful exporters in the world for decades. Who does not know them, the names "Bosch", "Mercedes" or "Siemens"? All these companies are very closely linked with foreign countries - products are developed in Germany, preliminary products are manufactured abroad and somewhere in the world the products that industry needs or that consumers buy are created. This was true for many years and is still common practice in many companies today. But Corona has shown that globalisation needs different rules: a small screw, a small piece of rubber with a special shape should not lead to the entire production process being paralysed. Most German companies have to face this challenge because the German economy is still strongly industrialized and has hardly any significant companies in the new service sectors, as is the case with the Americans, e.g. Google, Facebook, Amazon or Netflix. Even the world's currently most expensive company, Apple, is not rated highly because of its factories, but because of the ideas about the potential "data from people" has for these companies.

The system of "short-time work" has so far softened the economic shock somewhat - weak demand and supply, which would otherwise have led to a high increase in unemployment, has been mitigated - but this system cannot continue forever. Germany had the advantage of being able to reduce public debt due to low ECB interest rates. Although this was at the expense of most savers in Germany, it helped companies survive. Now the debts are increasing at a high rate!
Now it will depend on how quickly the world will be able to develop and then produce an effective vaccine in sufficient quantity so that the fear of all the people of our world to die from this pandemic can be ended. Only then will it be possible to slowly return to the economic level that Germany had before the crisis.

Compared to China, India or the USA, Germany is a small country. This is why Germany is also urgently dependent on being able to negotiate jointly on the world stage in harmony with other European countries. The European Union therefore has a completely different status for Germany than for England, for example, which, embedded in the Commonwealth, can play a completely different role in the world. Nevertheless, most Germans regret the Brexit, because the United Kingdom has always helped to orientate state expenditure towards possible income and not vice versa!

Germany has a good social security system, but it is on shaky ground, as the population of Germany will shrink considerably over the next three decades, from the current 83 million people (slightly more women than men) to around 72 million. This decline, combined with an increase in average life expectancy, will place a heavy burden on the social security systems, which are all financed on a pay-as-you-go basis. Regardless of whether it is a pension in old age or provision in the event of illness, the state alone can no longer provide full coverage. This makes it all the more important in Germany for companies to offer their employees a supplementary company pension scheme. The German state supports this with tax subsidies. Even smaller companies can offer very efficient models for employees.

We hope that the World will manage the pandemic and all will find the right way to the future!

Rüdiger Blaich
Director - Germany

Topics:BusinessEuropeCoronavirus