1 00:00:03,080 --> 00:00:10,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. After decades of being 2 00:00:10,280 --> 00:00:14,200 Speaker 1: known as the growth engine of Europe, the German economy 3 00:00:14,480 --> 00:00:17,599 Speaker 1: is in trouble. One of the clearest warning signs is 4 00:00:17,600 --> 00:00:21,280 Speaker 1: coming from Germany's automotive industry, which is struggling to compete 5 00:00:21,320 --> 00:00:24,280 Speaker 1: with China and it's growing dominance in the electric vehicle 6 00:00:24,320 --> 00:00:34,320 Speaker 1: market bondust. Outside of Volkswagen plants across the country, tens 7 00:00:34,360 --> 00:00:38,080 Speaker 1: of thousands of workers have participated in walkouts and protests 8 00:00:38,479 --> 00:00:42,640 Speaker 1: over the threat of factory closures and layoffs. In footage 9 00:00:42,640 --> 00:00:45,400 Speaker 1: that played across German news networks in recent weeks, you 10 00:00:45,440 --> 00:00:49,320 Speaker 1: can hear the frustration and resolve in labor leaders' voices. 11 00:00:49,920 --> 00:00:55,440 Speaker 1: The union is continuing negotiations with the company this week, 12 00:00:56,680 --> 00:01:06,400 Speaker 1: and I'm fogs fine. The Volkswagen business is an iconic 13 00:01:06,480 --> 00:01:10,360 Speaker 1: German brand, wants a gleaming symbol of its post war strength, 14 00:01:11,040 --> 00:01:15,800 Speaker 1: and for workers like Deep Martuccier, Volkswang is how. 15 00:01:17,800 --> 00:01:19,080 Speaker 2: Lam in that folks Wang. 16 00:01:19,280 --> 00:01:24,200 Speaker 1: The company's struggles represent more than a symbolic blow. Deetmar 17 00:01:24,360 --> 00:01:27,119 Speaker 1: is a production manager at the Volkswagen a G plant 18 00:01:27,160 --> 00:01:30,320 Speaker 1: in Emden, and he says that for him and his colleagues. 19 00:01:30,520 --> 00:01:34,640 Speaker 1: Volkswagen is their entire life. It's the lifeblood of the city. 20 00:01:37,240 --> 00:01:43,200 Speaker 1: Familia's on an Alpha. The prospect of a diminished Volkswagen 21 00:01:43,440 --> 00:01:47,960 Speaker 1: is terrifying. Deep Mar says it's existential. 22 00:01:47,760 --> 00:01:50,920 Speaker 2: On escape Engstrom. 23 00:01:52,720 --> 00:01:53,280 Speaker 3: Existence. 24 00:01:55,840 --> 00:01:59,160 Speaker 1: From Volkswagen workers in Emden to business leaders in Munich 25 00:01:59,240 --> 00:02:03,160 Speaker 1: to government off in the Bundestag, there's this new creeping 26 00:02:03,240 --> 00:02:08,480 Speaker 1: feeling of anxiety about Germany's economic trajectory. Amy Webb is 27 00:02:08,520 --> 00:02:12,480 Speaker 1: the CEO of the Future Today Institute, which advises companies 28 00:02:12,520 --> 00:02:16,360 Speaker 1: on long range planning and does trend forecasting, and she 29 00:02:16,480 --> 00:02:19,440 Speaker 1: says this sense of malaise has been growing for years. 30 00:02:20,200 --> 00:02:23,680 Speaker 1: A series of gradual setbacks for Germany and for German 31 00:02:23,760 --> 00:02:26,040 Speaker 1: businesses are starting to add up. 32 00:02:27,200 --> 00:02:29,880 Speaker 2: It's death by a thousand paper cuts. So if you 33 00:02:29,880 --> 00:02:32,160 Speaker 2: think about the last time you had a paper cut, 34 00:02:32,360 --> 00:02:35,480 Speaker 2: it's annoying. It might sting a little. If you are 35 00:02:35,520 --> 00:02:38,280 Speaker 2: a mechanic, it might make it hard to use a tool, 36 00:02:38,760 --> 00:02:44,440 Speaker 2: but it's a temporary inconvenience. Now imagine your entire body 37 00:02:44,639 --> 00:02:49,200 Speaker 2: is covered in thousands of paper cuts. Technically you are 38 00:02:49,240 --> 00:02:54,240 Speaker 2: still alive, but your life is miserable. That describes what's 39 00:02:54,240 --> 00:02:57,880 Speaker 2: happening to Germany. German companies are in the process of 40 00:02:57,919 --> 00:02:59,720 Speaker 2: accumulating paper cuts. 41 00:03:00,280 --> 00:03:03,200 Speaker 1: Chris Ryder, a senior editor at Bloomberg based in Berlin, 42 00:03:03,400 --> 00:03:06,600 Speaker 1: worked with a team of economists and reporters to capture 43 00:03:06,639 --> 00:03:10,560 Speaker 1: why and by how much Germany's growth is slowing. 44 00:03:11,280 --> 00:03:14,320 Speaker 3: Our colleagues at Bloomberg Economics have done an analysis and 45 00:03:14,360 --> 00:03:18,120 Speaker 3: they argue that Germany's economy is now five percent smaller 46 00:03:18,120 --> 00:03:20,640 Speaker 3: than it would have been if the pre pandemic growth 47 00:03:20,680 --> 00:03:21,679 Speaker 3: trend had continued. 48 00:03:22,280 --> 00:03:25,600 Speaker 1: It's all laid the groundwork for an increasingly fragmented government, 49 00:03:25,800 --> 00:03:30,280 Speaker 1: a growing fringe movement, and a paralyzed establishment. On Monday, 50 00:03:30,480 --> 00:03:33,639 Speaker 1: the German Parliament officially took a vote of no confidence 51 00:03:33,680 --> 00:03:36,560 Speaker 1: in the government, paving the way for a snap election 52 00:03:36,880 --> 00:03:40,680 Speaker 1: in February. The rest of Europe is watching closely. 53 00:03:41,400 --> 00:03:44,520 Speaker 3: Germany's Europe's largest economy, the third largest from the world. 54 00:03:44,680 --> 00:03:48,400 Speaker 3: If Germany starts getting a cold, the rest of Europe 55 00:03:48,440 --> 00:03:49,280 Speaker 3: gets sick as well. 56 00:03:54,040 --> 00:03:59,080 Speaker 1: Today on the show Germany's sluggish Economy, Why it's fueling 57 00:03:59,160 --> 00:04:03,640 Speaker 1: political polarization and what could turn things around. This is 58 00:04:03,680 --> 00:04:11,440 Speaker 1: the big take from Bloomberg News. I'm Sarah Holder. Chris 59 00:04:11,560 --> 00:04:14,600 Speaker 1: we're talking because the German economy is at a critical 60 00:04:14,640 --> 00:04:16,839 Speaker 1: moment right now. Tell us what's happening. 61 00:04:16,880 --> 00:04:18,400 Speaker 3: I mean, I would say it's more than the economy. 62 00:04:18,440 --> 00:04:20,719 Speaker 3: I mean that it ripples throughout German society. And the 63 00:04:20,760 --> 00:04:23,680 Speaker 3: issue is that Germany has been stagnating. Germany is a 64 00:04:23,680 --> 00:04:29,159 Speaker 3: country that's basically known expansion for decades, survived reunification, the 65 00:04:29,200 --> 00:04:32,280 Speaker 3: Cold War, obviously post war reconstruction, and so it's at 66 00:04:32,320 --> 00:04:34,520 Speaker 3: a moment now where all of a sudden the economy 67 00:04:34,560 --> 00:04:35,479 Speaker 3: is struggling. 68 00:04:35,920 --> 00:04:39,400 Speaker 1: Is the economy actually shrinking or is the fear just 69 00:04:39,600 --> 00:04:41,480 Speaker 1: this stagnation the problems. 70 00:04:41,520 --> 00:04:45,040 Speaker 3: It's more stagnation than shrinking, so there's not a sudden 71 00:04:45,120 --> 00:04:49,120 Speaker 3: shock to the system. It's more a slow, gradual loss 72 00:04:49,200 --> 00:04:50,240 Speaker 3: of competitiveness. 73 00:04:50,320 --> 00:04:52,679 Speaker 1: What's driving the slow down in growth. 74 00:04:52,839 --> 00:04:57,360 Speaker 3: Some of the main structural issues are high energy prices. 75 00:04:57,480 --> 00:05:00,640 Speaker 3: Germany was very exposed to Russian energy, got more than 76 00:05:00,640 --> 00:05:02,719 Speaker 3: half of its gas from Russia, and so after the 77 00:05:02,720 --> 00:05:06,240 Speaker 3: war in Ukraine, after the full scale invasion, Russia clamped 78 00:05:06,240 --> 00:05:08,400 Speaker 3: down on supplies in order to put pressure on Germany 79 00:05:08,440 --> 00:05:11,640 Speaker 3: to try to halt it from supporting Ukraine. So now 80 00:05:11,680 --> 00:05:15,640 Speaker 3: Germany is structurally exposed to really higher cost liquefied natural 81 00:05:15,680 --> 00:05:18,320 Speaker 3: gas that it has to get via ships. So the 82 00:05:18,440 --> 00:05:21,640 Speaker 3: energy system is very fragile, it's very insecure. The country 83 00:05:21,680 --> 00:05:25,320 Speaker 3: is still functioning, but energy intentsive industries like glass making, 84 00:05:25,480 --> 00:05:28,560 Speaker 3: like autos, like steel are really under threat from this. 85 00:05:29,160 --> 00:05:31,000 Speaker 3: And then on top of that, the auto industry is 86 00:05:31,000 --> 00:05:34,719 Speaker 3: heavily under pressure from a competitive standpoint. It's struggling with 87 00:05:34,800 --> 00:05:38,359 Speaker 3: a transition to electric cars. The technology coming out of 88 00:05:38,440 --> 00:05:41,960 Speaker 3: China is better and cheaper, and the German cars just 89 00:05:42,000 --> 00:05:46,320 Speaker 3: aren't being able to innovate as quickly as the Chinese competitors. 90 00:05:46,440 --> 00:05:49,080 Speaker 3: And Volkswagen has threatened to close factories here in Germany. 91 00:05:49,560 --> 00:05:53,120 Speaker 3: If Volkswagen struggles, and it's like a vast community of 92 00:05:53,120 --> 00:05:56,039 Speaker 3: supplier struggle, it creates like ripple effects all down the 93 00:05:56,080 --> 00:05:56,800 Speaker 3: supply chain. 94 00:05:58,560 --> 00:06:02,960 Speaker 1: In concrete terms, what does a weaker German economy mean 95 00:06:03,080 --> 00:06:04,360 Speaker 1: for families in the country. 96 00:06:04,600 --> 00:06:07,520 Speaker 3: What is different about Germany than other countries and especially 97 00:06:07,520 --> 00:06:10,080 Speaker 3: the US, is how many people are actually exposed to 98 00:06:10,160 --> 00:06:14,799 Speaker 3: economic cycles. Because most Germans are tenants, most Germans rent, 99 00:06:15,160 --> 00:06:19,279 Speaker 3: and so that just creates a different anxiety. Say, for instance, 100 00:06:19,320 --> 00:06:22,360 Speaker 3: if you are a blue collar worker, if you lose 101 00:06:22,400 --> 00:06:25,320 Speaker 3: your job at Volkswagen, which is a well paid job 102 00:06:25,320 --> 00:06:28,919 Speaker 3: at Volkswagen. You probably rent your place, so if you 103 00:06:29,000 --> 00:06:32,040 Speaker 3: start missing rent payments, you could get evicted. There's not 104 00:06:32,200 --> 00:06:35,400 Speaker 3: like you can find a cheaper place to live because 105 00:06:35,480 --> 00:06:39,039 Speaker 3: there's a shortage of housing. In general. The amount of 106 00:06:39,040 --> 00:06:41,919 Speaker 3: social housing has collapsed by like seventy five percent or 107 00:06:41,960 --> 00:06:45,839 Speaker 3: so in the last like twenty thirty years. So it 108 00:06:45,920 --> 00:06:49,840 Speaker 3: creates a whole snowball effect of anxiety. As the economy struggles, 109 00:06:49,839 --> 00:06:52,719 Speaker 3: people see their own livelihoods impacted immediately. 110 00:06:53,200 --> 00:06:56,880 Speaker 1: An analysis by Bloomberg Economics puts a number to that impact. 111 00:06:57,560 --> 00:07:01,279 Speaker 1: Germany's loss competitiveness has meant that households there are worse 112 00:07:01,320 --> 00:07:05,000 Speaker 1: off by about twenty five hundred euros of disposable income 113 00:07:05,120 --> 00:07:09,520 Speaker 1: each year, and Chris says people are feeling their standards 114 00:07:09,520 --> 00:07:10,400 Speaker 1: of living get worse. 115 00:07:11,120 --> 00:07:13,880 Speaker 3: So you have people basically living from paycheck to paycheck. 116 00:07:14,000 --> 00:07:18,400 Speaker 3: They're exposed to rising rents, they're exposed to poorhousing policy, 117 00:07:18,400 --> 00:07:22,160 Speaker 3: they're exposed to economic cycles. The level and intensity of 118 00:07:22,160 --> 00:07:25,280 Speaker 3: procarity is i would say higher in Germany than it 119 00:07:25,320 --> 00:07:27,160 Speaker 3: is in many other countries and certainly in the US. 120 00:07:27,240 --> 00:07:29,560 Speaker 3: So that's an impact that people feel even if they 121 00:07:29,600 --> 00:07:32,160 Speaker 3: don't know where or why it comes from. And that's 122 00:07:32,200 --> 00:07:36,480 Speaker 3: what feeds this anxiety and frustration that is pretty evident 123 00:07:36,520 --> 00:07:37,680 Speaker 3: if you're in Germany right now. 124 00:07:38,480 --> 00:07:41,880 Speaker 1: And the kind of loss competitiveness that's slow and gradual, 125 00:07:42,600 --> 00:07:46,080 Speaker 1: it makes it trickier to respond to, right what's the 126 00:07:46,240 --> 00:07:48,679 Speaker 1: risk here with this kind of economic malaise. 127 00:07:49,480 --> 00:07:52,680 Speaker 3: The risk of that slow, gradual loss of competitiveness is 128 00:07:52,720 --> 00:07:56,239 Speaker 3: that it doesn't provoke a policy response like it does 129 00:07:56,400 --> 00:08:00,200 Speaker 3: when there's a unique crisis, say like reunification or in 130 00:08:00,200 --> 00:08:02,560 Speaker 3: the early two thousands, Germany was considered the sick men 131 00:08:02,600 --> 00:08:05,240 Speaker 3: of Europe and it had a major unemployment problem, so 132 00:08:05,480 --> 00:08:08,640 Speaker 3: it had a very targeted solution and that helped it 133 00:08:09,240 --> 00:08:13,200 Speaker 3: expand for the last twenty years. About so, because of 134 00:08:13,320 --> 00:08:16,840 Speaker 3: the problems that Germany face is now a slow stagnation 135 00:08:17,120 --> 00:08:20,920 Speaker 3: and not a sudden shock or a clear problem. The 136 00:08:21,080 --> 00:08:23,720 Speaker 3: risk is that the reaction is muted. 137 00:08:24,440 --> 00:08:28,040 Speaker 1: Another country faced with this situation might consider upping government 138 00:08:28,120 --> 00:08:33,520 Speaker 1: spending on things like infrastructure, education, defense, injecting a stimulus 139 00:08:33,559 --> 00:08:36,880 Speaker 1: to boost the economy, But Chris says Germany has been 140 00:08:36,920 --> 00:08:39,760 Speaker 1: far less willing than other European nations to make this 141 00:08:39,920 --> 00:08:44,000 Speaker 1: kind of investment even when faced with less dire circumstances. 142 00:08:45,000 --> 00:08:48,840 Speaker 3: Yeah, that's a very cultural trait. Germany itself is usually 143 00:08:48,880 --> 00:08:52,839 Speaker 3: fiscally rather conservative and doesn't like to spend a lot 144 00:08:52,840 --> 00:08:54,800 Speaker 3: of money, doesn't like to borrow a lot of money. 145 00:08:54,880 --> 00:08:57,440 Speaker 3: There's something called the debt break in Germany, which limits 146 00:08:57,480 --> 00:09:01,040 Speaker 3: the amount of debt spending Germany can allow. Was a 147 00:09:01,040 --> 00:09:05,560 Speaker 3: constitutional amendment that was passed during the medical era. After 148 00:09:05,600 --> 00:09:08,360 Speaker 3: the global financial crisis, Germany spent a ton of money 149 00:09:08,520 --> 00:09:12,120 Speaker 3: to bail out banks its financial system, like many other countries, 150 00:09:12,160 --> 00:09:14,160 Speaker 3: but in order to make sure that the government wasn't 151 00:09:14,200 --> 00:09:17,439 Speaker 3: constantly bailing out industries, they set this step break and 152 00:09:18,000 --> 00:09:21,040 Speaker 3: that has led to this reluctance to spend. So it's 153 00:09:21,080 --> 00:09:24,200 Speaker 3: been decades at this point of under investment and everything 154 00:09:24,240 --> 00:09:26,320 Speaker 3: from infrastructure to digital technology. 155 00:09:26,840 --> 00:09:30,120 Speaker 1: And how does that impact the pace of growth or 156 00:09:30,160 --> 00:09:32,400 Speaker 1: the pace of the slowdown of the German economy? Like 157 00:09:32,480 --> 00:09:35,040 Speaker 1: how important is it to do this kind of public 158 00:09:35,040 --> 00:09:37,760 Speaker 1: investment if you really want to turn things around? 159 00:09:38,160 --> 00:09:40,760 Speaker 3: It's massive. Just a few weeks ago, there was a 160 00:09:40,800 --> 00:09:44,760 Speaker 3: bridge collapsed in Dresden, and there's estimates that there's thousands 161 00:09:44,760 --> 00:09:47,680 Speaker 3: of bridges that are threatened to collapse. So that decaane 162 00:09:47,720 --> 00:09:50,319 Speaker 3: infrastructure has real world impacts on the economy and how 163 00:09:50,320 --> 00:09:52,680 Speaker 3: it can breathe, how it just can move equipment around, 164 00:09:52,760 --> 00:09:55,280 Speaker 3: to be quite frank, like whether you can get goods 165 00:09:55,440 --> 00:09:58,440 Speaker 3: and supplies from factories to customer. And then on top 166 00:09:58,480 --> 00:10:01,000 Speaker 3: of it, there's the whole technology side, like Germany lags 167 00:10:01,000 --> 00:10:04,200 Speaker 3: in terms of digital infrastructure and broad band rollout, and 168 00:10:04,280 --> 00:10:08,240 Speaker 3: so the reluctance to invest over time has accumulated to 169 00:10:08,360 --> 00:10:11,800 Speaker 3: a point of where it's coming up the entire economy. 170 00:10:14,800 --> 00:10:18,560 Speaker 1: When we come back how Germany's economic concerns, explain why 171 00:10:18,640 --> 00:10:22,200 Speaker 1: its government is increasingly fragmented and what the results of 172 00:10:22,240 --> 00:10:36,360 Speaker 1: next year's election could mean for Germany's financial future. Germany's 173 00:10:36,360 --> 00:10:39,080 Speaker 1: economy has had to contend with the war in Ukraine, 174 00:10:39,280 --> 00:10:43,880 Speaker 1: a pandemic, a housing shortage, flagging public investment, and increasing 175 00:10:43,920 --> 00:10:48,120 Speaker 1: global competition. So I asked Bloomberg's Chris Writer whether this 176 00:10:48,280 --> 00:10:51,600 Speaker 1: moment was born out of bad decisions or bad luck 177 00:10:52,400 --> 00:10:53,960 Speaker 1: or a combination of both. 178 00:10:54,600 --> 00:10:56,880 Speaker 3: Definitely a combination of both, but certainly like a lot 179 00:10:56,880 --> 00:10:59,640 Speaker 3: of bad decisions. So Schultz, he'll get a lot of 180 00:10:59,679 --> 00:11:02,480 Speaker 3: the book because he's been the chance for the last 181 00:11:02,480 --> 00:11:04,520 Speaker 3: four years when a lot of these problems have really 182 00:11:04,520 --> 00:11:07,600 Speaker 3: become clear and evident. But there were a lot of 183 00:11:07,600 --> 00:11:11,079 Speaker 3: bad decisions that go back quite long decades. In some cases, 184 00:11:11,480 --> 00:11:15,520 Speaker 3: for instance, the dependence on Russian energy started under Gerhard Schrueder. 185 00:11:15,800 --> 00:11:18,640 Speaker 3: The lack of investment was really like ran in the 186 00:11:18,800 --> 00:11:21,360 Speaker 3: entire medical era, which was sixteen years. 187 00:11:21,600 --> 00:11:24,200 Speaker 1: Is there sort of a finger pointing game going on 188 00:11:24,280 --> 00:11:24,680 Speaker 1: right now? 189 00:11:24,880 --> 00:11:27,160 Speaker 3: There's a lot of fingers being pointed at a lot 190 00:11:27,160 --> 00:11:29,480 Speaker 3: of different people. I mean, Schultz is certainly on the 191 00:11:29,559 --> 00:11:33,000 Speaker 3: front lines of it, and his finance minister, Christian Lindner, 192 00:11:33,040 --> 00:11:36,719 Speaker 3: who's from the Free Democrats. So the dispute between the 193 00:11:36,760 --> 00:11:38,680 Speaker 3: two was what led to the government collapse. 194 00:11:39,200 --> 00:11:41,800 Speaker 1: This week's no confidence vote set the stage for an 195 00:11:41,840 --> 00:11:46,000 Speaker 1: election in February in which several parties are vying for power. 196 00:11:46,800 --> 00:11:49,880 Speaker 1: I asked Chris about how these economic conditions we've been 197 00:11:49,920 --> 00:11:53,800 Speaker 1: talking about are weighing on voters' minds and influencing which 198 00:11:53,880 --> 00:11:56,600 Speaker 1: candidates are finding a foothold with the electorate. 199 00:11:57,000 --> 00:12:00,400 Speaker 3: People look for a scapegoat, So an escape in a 200 00:12:00,440 --> 00:12:04,320 Speaker 3: lot effects is the establishment parties, and there's only two 201 00:12:04,360 --> 00:12:07,560 Speaker 3: parties that have fielded a chancellor in the entire post 202 00:12:07,600 --> 00:12:10,800 Speaker 3: war period. So it's the Social Democrats that Schultz party, 203 00:12:10,840 --> 00:12:14,439 Speaker 3: and the Christian Democrats was Americal's party. The Christian Democrats 204 00:12:14,440 --> 00:12:17,800 Speaker 3: are the center right conservatives and they're likely to win, 205 00:12:18,160 --> 00:12:20,920 Speaker 3: so they're leading in the polls. But unlike the US, 206 00:12:20,960 --> 00:12:23,839 Speaker 3: there's lots of other parties that have gathered support, and 207 00:12:24,160 --> 00:12:27,000 Speaker 3: at the moment there's about twenty five percent for like 208 00:12:27,360 --> 00:12:32,520 Speaker 3: fringe parties, including the far right Alternative for Germany the AfD. 209 00:12:33,320 --> 00:12:37,360 Speaker 3: So you have this real, like more fragmented political landscape 210 00:12:37,400 --> 00:12:38,560 Speaker 3: than you've ever had before. 211 00:12:38,800 --> 00:12:42,120 Speaker 1: These parties that are gaining ground, the far right Alternate 212 00:12:42,200 --> 00:12:45,160 Speaker 1: for Germany, the left leaning BSW, the front runner, the 213 00:12:45,240 --> 00:12:47,600 Speaker 1: Christian Democrats. Can you break down where each of these 214 00:12:47,640 --> 00:12:51,640 Speaker 1: parties stands on these economic issues and what's resonating with voters. 215 00:12:51,880 --> 00:12:55,440 Speaker 3: Yes, So the Christian Democrats like as being the leading party. 216 00:12:56,120 --> 00:13:01,280 Speaker 3: They're looking for very traditional sort of conservative policies, so 217 00:13:01,520 --> 00:13:06,440 Speaker 3: lower taxes, limited regulation, less government and out. And the 218 00:13:06,480 --> 00:13:09,200 Speaker 3: Social Democrats are very much like a blue collar kind 219 00:13:09,240 --> 00:13:11,840 Speaker 3: of associated party. They are very close to the unions, 220 00:13:12,240 --> 00:13:14,439 Speaker 3: so they want to protect jobs in the steel industry, 221 00:13:14,760 --> 00:13:17,440 Speaker 3: in the automotive industry, and the chemical industry, and so 222 00:13:17,679 --> 00:13:20,120 Speaker 3: they want like a bigger role for the state. The 223 00:13:20,240 --> 00:13:24,480 Speaker 3: only really possible mainstream coalition is between these two parties, 224 00:13:24,800 --> 00:13:27,000 Speaker 3: and those are two sets of policies and ideas that 225 00:13:27,040 --> 00:13:29,240 Speaker 3: don't necessarily match well together. 226 00:13:29,920 --> 00:13:33,600 Speaker 1: These other parties, like the AfD and the BSW, are 227 00:13:33,640 --> 00:13:38,480 Speaker 1: offering more radical responses to economic concerns. The AfD, for 228 00:13:38,559 --> 00:13:42,240 Speaker 1: its part is whipping up anti immigration sentiments, while the 229 00:13:42,280 --> 00:13:45,640 Speaker 1: left leaning BSW is pro Kremlin and would opt for 230 00:13:45,720 --> 00:13:49,240 Speaker 1: closer ties to Russia. And as they pull votes from 231 00:13:49,280 --> 00:13:52,840 Speaker 1: the more mainstream parties like the Christian Democrats, the Social 232 00:13:52,880 --> 00:13:56,360 Speaker 1: Democrats and the Greens, Chris says there's a risk that 233 00:13:56,400 --> 00:14:00,480 Speaker 1: the establishment tries to play it safer in comparison to 234 00:14:00,559 --> 00:14:04,120 Speaker 1: moderate even more. And Chris says playing it too safe 235 00:14:04,440 --> 00:14:07,040 Speaker 1: is the last thing a stagnant economy needs. 236 00:14:07,440 --> 00:14:10,079 Speaker 3: The risk in Germany is that you have a shrinking center. 237 00:14:10,160 --> 00:14:14,000 Speaker 3: A quarter of the population is being lured by fringe parties, 238 00:14:14,640 --> 00:14:18,560 Speaker 3: and so you have the center establishment parties that don't 239 00:14:18,559 --> 00:14:21,720 Speaker 3: want to lean too far out the window with policies 240 00:14:21,720 --> 00:14:24,600 Speaker 3: that might scare people, because they know the electorate is 241 00:14:24,640 --> 00:14:30,120 Speaker 3: already destabilized, is already lured by the sirens song in 242 00:14:30,160 --> 00:14:33,560 Speaker 3: the AfD's case, really ethnic nationalism. In the bsw's case, 243 00:14:33,600 --> 00:14:37,360 Speaker 3: it's more like a pro Russia left leaning tax the ridge. 244 00:14:37,480 --> 00:14:40,920 Speaker 3: So you get the result is these kind of muddled, 245 00:14:41,280 --> 00:14:44,280 Speaker 3: play it safe kind of policies that don't go far 246 00:14:44,360 --> 00:14:47,400 Speaker 3: enough to address Germany's fundamental issues. 247 00:14:47,640 --> 00:14:50,720 Speaker 1: What kinds of things could the country actually do to 248 00:14:51,320 --> 00:14:54,360 Speaker 1: repair its economy and make sure that stagnation doesn't continue. 249 00:14:54,400 --> 00:14:56,560 Speaker 3: It's going to cost a lot of money. That's the reality. 250 00:14:56,640 --> 00:14:59,400 Speaker 3: So our colleagues at Bloomberg Economics had worked out is 251 00:14:59,440 --> 00:15:02,920 Speaker 3: that just for Germany to get up to speed with 252 00:15:03,000 --> 00:15:05,040 Speaker 3: the rest of the G seven, they would have to 253 00:15:05,080 --> 00:15:08,120 Speaker 3: increase spending by about one percent of GDP. 254 00:15:08,680 --> 00:15:12,400 Speaker 1: Increasing public investment by more than one percent of GDP 255 00:15:12,800 --> 00:15:16,400 Speaker 1: means spending about an extra fifty billion euros. 256 00:15:17,400 --> 00:15:19,920 Speaker 3: So that's not an insignificant amount. And like a lot 257 00:15:19,960 --> 00:15:22,880 Speaker 3: of that spending, you can spend it like roads, infrastructure, 258 00:15:23,000 --> 00:15:26,000 Speaker 3: railways to get the economy moving again, really to like 259 00:15:26,280 --> 00:15:29,880 Speaker 3: feed out those bottlenecks. Education is a huge issue that 260 00:15:29,920 --> 00:15:33,640 Speaker 3: hasn't been really properly funded for a while and needs 261 00:15:33,760 --> 00:15:37,240 Speaker 3: more investment. Housing is a massive issue because it creates 262 00:15:37,240 --> 00:15:41,080 Speaker 3: like lots of instability for lots of people, and technology 263 00:15:41,440 --> 00:15:43,480 Speaker 3: just moving more in a direction that the rest of 264 00:15:43,480 --> 00:15:44,280 Speaker 3: the world is going in. 265 00:15:48,320 --> 00:15:51,400 Speaker 1: This is the Big Take from Bloomberg News. I'm Sarah Holder. 266 00:15:51,880 --> 00:15:54,800 Speaker 1: This episode was produced by Jessica Beck, who also sound 267 00:15:54,840 --> 00:15:59,160 Speaker 1: designed it, and by Audrian Atapia, who also fact checked it. 268 00:15:59,160 --> 00:16:02,080 Speaker 1: It was edited by Haitlin Kenny and Ben Sills. It 269 00:16:02,160 --> 00:16:06,160 Speaker 1: was mixed by Alex Sugia. Our senior producer is Naomi Shaven. 270 00:16:06,360 --> 00:16:09,960 Speaker 1: Our senior editor is Elizabeth Ponso. Our executive producer is 271 00:16:10,040 --> 00:16:13,960 Speaker 1: Nicole Beamster. Bor Sage Bauman is Bloomberg's head of Podcasts. 272 00:16:14,480 --> 00:16:18,120 Speaker 1: Special thanks to Magdalena del vae. If you liked this episode, 273 00:16:18,240 --> 00:16:20,840 Speaker 1: make sure to subscribe and review The Big Take wherever 274 00:16:20,920 --> 00:16:23,840 Speaker 1: you listen to podcasts. It helps people find the show. 275 00:16:24,480 --> 00:16:27,120 Speaker 1: Thanks for listening. We'll be back tomorrow.