German exports to the UK plunged by almost a third in January, as the downward trend since Brexit continues to gather pace. A preliminary estimate published this week by the Federal Statistics Office reveals that the UK’s divorce from the EU, combined with coronavirus, helped trigger a nearly 30 percent slump in German exports to Britain in the first month of the year. That was nearly double the 15.5 percent decline in 2020, which was the biggest annual drop since the financial crisis in 2009, according to the agency.
The new figures are not the only thing Mrs Merkel has to worry about, though, as a recent survey published by FAZ also reveals German companies spent 2.2 percent less on innovation last year than in 2019.
According to the head of Oxford-based think-tank Euro Intelligence Wolfgang Munchau, this report is significant as spending on innovation is a barometer for future productivity growth.
He explained: “FAZ says one of the factors is Brexit, which has added to the uncertainties of the pandemic. Another factor – which is not reflected in the data – is a reduced efficiency of the investments.
“Our suspicion is that the growing gap in digital infrastructure is a factor.
“What the ZEW data show is that large companies kept investing. Virtually all of the decline is due to small and medium sized companies, where investments in innovation fell by nine percent.”
Mr Munchau noted the rise in innovation investments from 2.4 percent of GDP in 2005 to 3.1 percent in 2019 was one of the engines behind Germany’s strong economic performance.
However, one-third of that was due to the car industry alone – another indicator of Germany’s vulnerability to that one sector.
He concluded: “Another problem is the lack of digital investments. Germany’s tendency to double down on analogue technologies, like diesel cars, and the failure to invest in digital technologies is showing through in the data.
“Just as it took a long time for the misallocation to affect investments and productivity growth, it will take a long time for catch-up investments in digital technologies to reverse.
“What we expect to see in Germany is a period of relative economic decline ahead – relative to the world, but also relative to other countries in the eurozone.”
The survey and the trade slump might have raised alarm bells in the EU, as according to German MEP Gunnar Beck the bloc will start crumbling when German money runs out.
He told Express.co.uk: “EU leaders absolutely want European integration… why?
“It’s a mystery to me because, so far, they haven’t been successful.
“The European Community was relatively successful but things started going down the drain with the single currency and so on.
“The economic performance of the last 25 years has been abysmal.”
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“This whole idea of Merkel’s austerity is very unconvincing.
“She is the most expensive Chancellor in German history.”
He added: “She is obviously paying German money left, right and centre.
“What is happening now is that the whole of Europe is becoming dependent on Germany and to a less extent Northern European money.
“Southern Europe appears to stand no chance at regaining competitiveness.
“It is not a very healthy state of affairs.”
At the end of July, EU leaders struck a deal on a huge coronavirus recovery package after days of bitter talks.
The €750billion (£668billion) coronavirus fund, spearheaded by France and Germany, will be used as loans and grants to the countries hit hardest by the virus.
The remaining money represents the EU budget for the next seven years.