Analysts at Rabobank note that Germany has become increasingly dependent on exports for its economic performance, supported by an initially strong competitive position and robust demand for capital goods.

• “The negative consequences of this export-led model are now starting to materialize.
• We believe there is a colossal need for government and private sector investment in infrastructure, climate-related innovation and Germany’s poor digital infrastructure.
• Germany is also feeling the impact of an aging population more than other eurozone member states. The negative contribution of labor to future economic growth could be as high as -0.8ppt annually.
• We argue that adopting an investment fund focused on R&D, capital formation and education could lead to significantly higher TFP growth.
• We look at two investment scenarios (€150bn and €450bn) that could lift the country’s potential growth rate.
• While the government is unlikely to abandon its strict budgetary rules for the €450bn package, we believe a €150bn investment package is possible under the constitution - although it will still take some political will to implement it.”