What's contributing to Germany’s economic slowdown in productivity?

CGTN Europe

International Economist Vicky Pryce spoke to CGTN Europe on Germany’s economic risks.

Transcript

00:00Economiste Vicky Price. Vicky, thank you very much for joining us.

00:04So, the German Chancellor then saying that this is a big problem for Germany.

00:09Now, how, in the grand scheme of things, do you think this is Germany's big problem?

00:15I think the aging population is a big, big issue for everyone.

00:20It's not just really for Germany, but we've seen it happening in Japan,

00:24and we're seeing concerns about that in very many parts of Europe right now.

00:29Not in the UK, where population is still going up, but in many other places,

00:33where there is going to be an issue of skills being in short supply in the future,

00:38and therefore growth suffering.

00:40In addition, of course, you've got the issue of the welfare bill,

00:44pensions, who's going to pay for those in the future.

00:47But, of course, what we heard today is not just a question of economics,

00:51it's also a question of security in the country.

00:54And I think one of the motivations for increasing, if you like,

00:59the types of controls for people coming in in Germany

01:02is because there is quite a considerable worry in Germany in particular,

01:07in terms of integrating people coming in from outside Europe.

01:11This has been the case recently in very, very large numbers.

01:15Yes, certainly. In terms of policies, though,

01:18what do you think that the German government could do

01:20to mitigate the impact of this ageing population?

01:25Well, the first thing one does, of course, generally,

01:27is increasing the age of pensionable age,

01:31but in the sense that you retire a little bit later.

01:34Yeah.

01:35I mean, what this means is that you continue to use your skills,

01:37assuming, of course, companies want you.

01:39Because what you do find very often is that,

01:42although people are willing to work at a later age,

01:45the reality is that firms are being quite conservative in this respect,

01:48and are tending to want to hire lots of younger people instead.

01:53But still, nevertheless, if you do that,

01:56if you extend the age with which you retire,

01:59you can certainly ensure, with the right policies,

02:02encouragement to employ more old people in business.

02:07And also, of course, sort of ensuring that the skills are kept up to date,

02:12because it's very, very important right now with AI and so on,

02:17that people who are not used to using any of those skills in the past

02:21get trained to move into the new economy.

02:25So you have to do that.

02:26And I think that, of course, helps up to a point.

02:30But I'm afraid, at the end,

02:32you do need to have more young people coming in,

02:35and therefore migration is going to be significant.

02:39And that is exactly what Chancellor Schultz has been talking about,

02:42saying that we do need migration,

02:44but migration can be in the right way and in the right sectors.

02:48Absolutely. Vicky, though, is it concerning that Germany

02:51has always been this economic powerhouse in Europe, hasn't it?

02:54So if Germany is struggling,

02:56is that a sign that the rest of Europe and the world could be suffering too?

03:01It's hugely concerning.

03:03And one of the problems, of course, is that Germany itself is in recession.

03:07At least it was in recession in the last quarter.

03:09And what you're seeing right now is the latest indicators,

03:13the IFA Institute Index, which looks at business sentiment, for example,

03:18has been falling for the last four months.

03:20And that's not good news.

03:22And the real worry is that, indeed,

03:24if Germany goes into a big slowdown,

03:27or at least prolonged slowdown,

03:30it's bound to bring other countries with it.

03:32So far, of course, a number of countries have done reasonably well,

03:34mainly because the summer has been good, a lot of tourism,

03:38quite a lot of the southern European countries are doing well.

03:41If you look at Spain in particular, but also Greece, for example,

03:47what you see is that there is big variability in terms of growth rates,

03:50but they're not very substantial, they're not very strong.

03:54And if Germany isn't doing well, then I think the rest suffers too.

03:57OK, Vicky Price, economist, thank you very much for your views.

04:01Thank you.

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