The German government has taken decisive actions in response to the dual economic shocks linked to the Covid-19 pandemic and Russian gas supplies’ cut-off – with the main objective of protecting its export-oriented industrial economy. By engaging in "competitive corporatism," the coalitional government has worked closely with the social partners – especially representatives from the chemical and metalworking-engineering export sectors – to restore domestic firms’ cost competitiveness while providing social compensation to vulnerable households and individuals.

The government's concerted threefold strategy to uphold the export-led growth regime includes: (1) measures aimed at reducing firms’ energy costs; (2) in/direct measures aimed at controlling the rise of labour costs to prevent a wage-price spiral; (3) substantial state aid provided to ailing firms.
The scope of state intervention in Germany's economy is unparalleled, entailing significant fiscal outlays for protective measures, made possible by Germany’s advantageous sovereign refinancing capacity. Germany’s economic activism risks jeopardising the EU single market due to extensive state aid, especially since Germany resists joint fiscal resource pooling for EU-wide industrial policy.

Continue reading the document