Germany is experiencing major economic difficulties, and the impact is beginning to be felt across Europe. Economists warn that the effects of Germany’s crisis are already being reflected in Romania’s economy, highlighting the risk of a dangerous downward spiral.
Germany’s economy entered a recession in the first quarter of 2024, following difficulties in the previous year. Without access to Russian gas, Germany is severely affected, and weak consumption and low industrial demand have delayed the much-anticipated economic recovery, according to the German Central Bank (Bundesbank), as cited by Reuters. These problems were anticipated as early as 2023, when the National Statistics Agency warned that the country could face its first two-year recession in two decades.
The energy crisis: a result of misguided policies Germany’s current economic difficulties could have been avoided, but under pressure from environmentalists, the country abandoned its nuclear industry, opting to rely almost exclusively on Russian gas. It has since been proven that renewable energy sources, such as photovoltaics and wind turbines, cannot meet the country’s energy needs. This energy policy has led to economic decline, affecting the population’s standard of living, which has penalized the ruling parties, especially the Greens. This discontent has fueled the rise of the far-right AfD party, which has secured over 30% of the vote in some regions.
Germany’s economic crisis is worsening, and the consequences are becoming more apparent. Volkswagen has announced significant layoffs, while major companies like BASF and Bosch have begun restructuring, raising concerns about unemployment and social unrest. Hans-Werner Sinn, a well-known economist and former president of the Ifo Institute in Munich, predicted the end of Germany’s industrial strength, signaling a tough period ahead for the country.
Impact on Romania Germany’s economic troubles are already affecting Eastern European countries, including Romania. Romania’s industry, particularly the automotive sector, is suffering from a lack of orders from Germany, resulting in marginal economic growth and additional challenges for local companies.
“Dark clouds are heading our way” “We are witnessing increasingly dark clouds gathering over the European economy. These clouds are coming our way as well. We are heavily dependent on trade relations with Germany, France, and Italy, our main partners. If they enter a crisis, unfortunately, we will feel the effects here, too. Our economy is already running at a slow pace, with economic growth barely measurable—only 0.1% in the second quarter compared to the first,” noted economist Adrian Negrescu.
Negrescu also highlighted that consumption, which had been driving Romania’s economic growth, has slowed. He warned that a predicted tax increase could push the economy into disaster. “The economy is slowing down more and more, and sales across all sectors of the Romanian economy are declining sharply. In this context, I believe the authorities must understand the economic signals and come up with stimulus measures in 2025, avoiding any tax hikes. If taxes are raised in 2025, we will surely lead the economy into recession, which means we will be in a deficit situation, as in the years of the crisis,” Negrescu explained.
Concerns about France and the UK “Consider that we had negative growth in Q4 2023, and in Q1 2024, economic growth was only 0.1%, according to the first data from the National Institute of Statistics, and in Q2, we also had 0.1% growth. So, we are practically on the verge of a technical recession, which, in my opinion, can only be avoided if we stimulate companies to reverse the trend of disintermediation that is increasingly affecting the economy, create jobs, restore economic chains, resume supplier credit, and encourage more companies to turn to bank loans by reducing the key interest rate through PNRR. Only in this way can we revive the economy, in addition to the absolutely necessary efforts to bring in the vital PNRR funds for state-invested projects, especially in the infrastructure sector,” concluded Negrescu.
