Are German industrial setbacks making its European partners happy? This is what the hierarchy of growth in Europe could suggest, where, for once, Germany is outclassed by the overwhelming majority of other economies, particularly in the South. If this hypothesis is true, we still need to be able to explain its mechanisms. With Germany, everything starts with industry. Since the end of the 2000s, the country has always been perceived as an industrial giant whose domination stifled the margins and volumes of peripheral countries. And if we compare today the dynamics of Germany’s manufacturing production to that of the rest of the EU, everything suggests that the German decline has created a breath of fresh air for the rest of Europe. But how is this possible?
Now is not the time for the revenge of the South
Germany is also a major importing nation. It includes in its subcontracting chain a whole series of countries which it is difficult to imagine could henceforth have an independent dynamic. In addition, it occupies high value-added niches deemed impregnable. It is difficult to imagine that peripheral countries have succeeded in dislodging it in so few years. We need to go into the data more closely to understand that, unfortunately, we are not living in the hour of the revenge of the South or the West. Behind the apparent robustness of non-Germanic industry, there is first of all the incredible trompe-l’oeil effect of Ireland. Indeed, the country’s manufacturing production is 80% above its 2018 level. Ireland is a real Trojan horse for the Anglo-Saxon giants who take up residence in the territory to invoice their products and house their profits there. The misappropriation of value from the European tax haven takes on such dimensions that it biases the analysis.
European exceptions that deceive the figures
To this extreme case, we must add two other singular cases but with significant effects on the average. First that of Denmark, whose manufacturing production exceeds its 2018 levels by almost 40%. The country has taken full advantage of the advantage that gas and oil production gives it. But above all, it has developed promising niche positions with very high added value, particularly in pharmaceuticals, wind power and capital goods, from which it is reaping the dividends. Another singular trajectory is that of Greece, whose industrial dynamism only marks the country’s return to its waterline after its descent into hell over the last two decades. And ultimately, when we add up these three small economies, it appears that the German decline has the mirror effect of the exceptional breakthrough of a small core.
The varied repercussions on Central and Western Europe
If we now focus on the regions where we can expect more mechanical fallout from German setbacks, on the one hand the CEECs, which enter the German value chain, and on the other hand the intermediate industrial powers , France, Italy, Spain, in more direct rivalry with German production, two major conclusions emerge. First, the Eastern countries, which had been drawn into the German wake, saw their exceptional dynamic shattered. They are nevertheless not swept away in the fall of their order giver. This resistance is primarily due to the fact that more and more German industries, in a defensive manner, are relocating their production to these territories. Then, some of these countries, like Poland, are gradually building an autonomous dynamic on the basis of their own advantages, particularly in batteries, household appliances or semiconductors. For the intermediate economies, France, Italy, Spain, the results are more bitter. They remain unchanged, significantly below the levels that prevailed before 2008 and even 2019. More than a reason for satisfaction or revenge, Germany’s industrial setbacks may well foreshadow a generalized weakening of Europe.
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