The Real Reason Behind the Future Collapse of the German Economy

Low Birth Rates and Demographic Challenges in Germany

In Germany, birth rates have reached the lowest level in the past ten years, while the number of marriages is close to post-war historical lows, exacerbating the demographic challenges facing the largest European economy.

Experts have noted that the weak performance of the German economy, which has barely grown in the four years following the coronavirus pandemic, combined with reduced public spending, has contributed to the country’s declining birth rate.

Impact of Economic Factors on Birth Rates

Last year, 693,000 children were born in Germany, marking the lowest level since 2013, with a 6.2% drop from the previous year, according to data from Destatis, the federal statistical office.

The decline in birth rates, population aging, and workforce contraction pose major issues for policymakers across Europe, increasing strain on public finances and weakening already tepid growth rates.

Challenges Ahead for German Society

The challenges of addressing Germany’s aging population have been underscored by a 7.6% decrease in the number of marriages in the country, reaching the lowest level since the start of data collection in 1950, excluding 2021 when pandemic lockdowns led to many weddings being postponed.

Economists have warned that if Germany’s birth rate continues to decline, it will exert downward pressure on its workforce and economic growth, especially as the large “baby boomer” generation born in the 1950s and 1960s retires.

Societal and Governmental Responses

Government reforms in 2005 and 2007 expanded childcare services and increased income for individuals on parental leave, leading to a higher percentage of employed women.

However, recent years have seen a worsening situation.
Labor shortages have led to reduced opening hours at daycare centers, while government budget constraints have limited parental leave for higher-income earners and cut funding for expanding childcare services.

International Comparisons and Future Prospects

Despite Germany ranking fifth in a 2021 Unicef report on childcare policies among 41 wealthy countries, analysts point out that the German tax system and school hours still discourage women from working.

Germany’s fertility rate – the average number of children per woman – stood at 1.46 in 2022, in line with the EU average but higher than countries like Italy, where it dropped to 1.2 last year.

While below the replacement level of 2.1, the fertility rate is lower among German citizens at 1.36 compared to foreign residents at 1.88.

Regional Variances and Immigration

Destatis reported a greater decline in birth rates in Eastern Germany compared to the West, with similar trends seen in marriage rates.

The German population remained stable at 83.2 million in 2020 and 2021 after the coronavirus pandemic but began growing again in 2022 due to an influx of 1.1 million immigrants, mainly from Ukraine following the Russia invasion.

To maintain its workforce, Germany aims to attract 400,000 immigrants annually and introduced new visa programs for skilled workers.
Data showed a significant increase in temporary visas granted to non-EU workers in 2023.

An economic study warned that workforce contraction and population aging could reduce Germany’s economic growth from an average annual rate of 1.4% in the past decade to just 0.4% in the current decade.

Source: The Financial Times