Weakness of investment in residential and non-residential
Germany’s low overall rate of investment in comparison
to other Eurozone countries results above all from
the weakness of investment in residential and non-
This is a consequence of the
1990s construction boom and the long adjustment phase
that followed. Currently, despite immigration, weak
demographics are holding back the sector.
In the case of investment in equipment, on the other
hand, there is no gap between Germany and the
other Eurozone countries. Indeed, in relation to overall
economic performance Germany is doing much better
here than the rest of the Eurozone.
But investment in
equipment is still low in historical terms, largely because
of the German economy’s heavy orientation on export
demand, which especially in the Eurozone is being
held back by overblown austerity policies. In their own
self-interest, German businesses should be arguing
for the Eurozone’s misplaced cost-cutting to finally be
abandoned, as should the German government.