So why is Germany suddenly ailing?
The standoff with Russia over Ukraine has received its fair share of blame in the German media. But that conflict may not hit the economy with full force until the third quarter. It was only last month that Europe stung Moscow with economic sanctions, prompting a tit-for-tat response from Russian President Vladimir Putin.
In reality, economists and some government officials acknowledge, there are deeper reasons for the recent downturn. And they have little to do with the spike in geopolitical tensions in eastern Europe or the Middle East.
They start at home, where Chancellor Angela Merkel’s abrupt exit from nuclear energy after the Fukushima disaster in Japan and aggressive push into renewables has unnerved German industry. A recent overhaul of the country’s complex renewable energy law has done little to alleviate uncertainty over future policy or assuage fears about German energy competitiveness.
“Energy intensive industries in particular have lost confidence in the future of Germany as a business location,” said Thomas Mayer, a former chief economist at Deutsche Bank who now runs the Cologne-based Flossbach von Storch Research Institute. “I think this is a major issue that will burden German industry for years to come.”
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