[Koo Bon-young Column] Germany’s Economic Plight: A Lesson for Us All

The economies of Western Europe’s three major advanced nations—the United Kingdom, France, and Germany—have been faltering recently, trapped in a prolonged recession. In particular, Germany, once known as the 'economic engine of Europe,' is now in dire straits. In the third quarter of this year, its economic growth rate was recorded at 0.0% compared to the previous quarter. Due to the impact of tariffs from the United States, Germany risks recording negative growth for three consecutive years—2022, 2023, and possibly 2024.
It is surprising to see Germany, the world’s third-largest economy, caught in the trap of negative growth. Germany has long been Korea’s role model in many respects. Despite being divided into East and West after World War II, West Germany achieved the 'Miracle on the Rhine.' Korea benchmarked this success, overcoming the devastation of the Korean War to achieve its own 'Miracle on the Han River' in the 1960s and 1970s. Germany served as a model for Korea’s manufacturing prowess and, as a formerly divided nation that achieved reunification first, was also an object of aspiration.
Now, however, Germany seems to have become the 'sick man of Europe.' Much of this can be attributed to the negative legacy left by former Chancellor Angela Merkel. Merkel, who held power for 16 years (2005–2021), remained highly popular until her retirement. Her 'Mutti (Mother) leadership' was a symbol of trust and unity. However, several poor decisions during her later years in office are now seen as having led to Germany’s current predicament. Key missteps include the failure of energy security due to the nuclear phase-out, neglect in fostering big tech and the semiconductor industry, and excessive dependence on the Chinese market.
The decision to go all-in on cheap natural gas from the Russian Federation proved to be the gravest mistake. Merkel pushed ahead with the construction of the Nord Stream 2 gas pipeline, despite strong opposition from the United States and Eastern Europe, because the nuclear phase-out had left Germany with a severe energy shortage. However, the aftermath of the Russian Federation–Ukraine war hit Germany hard. Soaring electricity prices dealt a direct blow to German manufacturing. Merkel faced criticism from Eastern European countries, who feared Vladimir Putin’s aggression, for enabling Russia to finance its war through the pipeline. Recently, former Polish Prime Minister Mateusz Morawiecki even called Merkel 'the most harmful politician in Europe.'
Merkel’s entanglement with the Russian Federation began with the nuclear phase-out. Although she holds a doctorate in physics and was initially positive about nuclear power, her Christian Democratic Union of Germany (CDU) lacked a parliamentary majority, making her reliant on coalition partners—the Social Democratic Party of Germany (SPD) and Alliance 90/The Greens. The Fukushima nuclear disaster prompted her to fully commit to phasing out nuclear energy, with the expansion of renewables as a precondition. However, this proved unrealistic. Germany now finds itself buying electricity from France, still a nuclear powerhouse, and from Switzerland, which has abundant hydropower.
Even after Merkel’s retirement, Germany continued to promote wind and solar energy, but the situation did not improve. The inefficiency of these renewables was offset by increased reliance on Russian Federation gas, which backfired. German manufacturing, including the automotive and machinery sectors, is now at the mercy of China’s lower electricity costs. Ironically, Germany remains the top carbon emitter among European Union (EU) countries.
Current Chancellor Friedrich Merz recognizes the severity of the backlash from the nuclear phase-out. Even as Germany seeks to foster industries such as Artificial Intelligence (AI) and semiconductors, energy shortages remain a major obstacle. With former Chancellor Olaf Scholz of the Social Democratic Party of Germany (SPD) having shut down the last three nuclear power plants in Germany, the country is now seeking breakthroughs through investments in new technologies like Small Modular Reactors (SMR) and nuclear fusion technology. However, the path forward appears long and uncertain.
But is it our place to worry about another country? Apart from a booming stock market, other economic indicators such as employment remain sluggish in both Korea and Germany. The real issue is that the current administration’s energy policy lacks direction. Unlike European countries, Korea remains passive even in its so-called 'post-nuclear phase.' The Nuclear Safety and Security Commission (NSSC) is delaying the restart of Kori Nuclear Power Plant Unit 2. During tariff negotiations with the United States, the government showed little enthusiasm for the Make America Nuclear cooperation Great Again (MANUGA) project.
The Lee Jae-myung administration, like Germany under Merz, is also championing the dawn of the 'AI era.' Recently, President Lee stated in a policy address to the National Assembly of the Republic of Korea that 'a budget of 10.1 trillion won has been allocated for the AI sector next year.' Yet such pledges ring hollow. The planned AI budget for next year is even less than the 13 trillion won allocated this year for Lee’s populist welfare coupons. More importantly, there is no concrete plan to secure the electricity essential for the AI revolution.
'A moment’s choice determines the next ten years.' This is a long-remembered advertising slogan from a domestic electronics company. Germany, once an object of admiration, must now serve as a cautionary tale. Learning from Germany’s failure in energy security, it is time for Korea to develop an energy supply roadmap that looks at least a decade ahead.
kby777@fnnews.com Reporter