SVE NEWS & CNBC Sharing Series – Germany after Merkel will face three key challenges, Goldman says

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Germany is about to embark upon a new political chapter that will have three main challenges, Goldman Sachs said Friday.

Chancellor Angela Merkel will leave office this fall following 16 years in power. Though Goldman believes she will leave Europe’s largest economy well-placed to recover from the coronavirus pandemic, the U.S. investment bank said climate change, trade frictions and an aging population will be the biggest obstacles in coming years.

“We see Germany exposed to a number of medium-term challenges, related to the missed structural opportunities during the Merkel years,” Goldman analysts said, adding that “the next government faces a balancing act between achieving the country’s ambitious climate goals and reaping the economic benefits from the green transition.”

Germany has put in place some of the most ambitious climate targets in Europe, seeking to cut its greenhouse gas emissions by 65% from 1990 levels by 2030. The 27 EU nations together vowed to reduce emissions by 55% over that period.

Policymakers are under intensifying pressure to deliver on promises made as part of the Paris Agreement ahead of this year’s COP26, due to be held in Glasgow, Scotland, in early November. Yet even as politicians publicly acknowledge the necessity of transitioning to a low-carbon society, hopes of limiting global warming — and meeting a crucial global target — are quickly deteriorating.

Germany’s climate plan will demand effective action in helping the most vulnerable sectors and workers to make sure they are not marginalized and that they support the move to a carbon-neutral society. In France, for instance, when the government tried to raise fuel taxes in late 2018, the move trigged a massive backlash that led to the “yellow vest” movement.

Trade

In addition, Goldman said, “Germany’s export-oriented economy looks vulnerable to ongoing de-globalisation trends.”

Germany has become Europe’s economic powerhouse thanks to its exports. In 2019, exports reached an all-time-high of 1.33 trillion euros ($1.57 trillion). This number dropped to 1.21 trillion euros in 2020 amid the Covid pandemic, according to data from its national statistics office.

There are concerns that recent issues over supply chains, calls for protectionism, the U.K.’s departure from the EU and an overall stagnating level of global trade will hamper German exports.

 

 

Sources from: CNBC

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