Outsourcing Competitiveness to Brussels

When a Chancellor gathers two hundred top executives and international investors to sell his country as a prime business destination, he usually expects the nation's economic establishment to support the charm offensive. Friedrich Merz’s two-day summit under the banner Invest in Germany was meant to signal a fresh start for an ailing economy. Yet before the corporate handshakes had even concluded, DIW President Marcel Fratzscher offered a sobering assessment, arguing that the relevant business location of the future is no longer Germany, but Europe.

It is a convenient pivot for a nation struggling with eroded competitiveness and mounting structural hurdles. Rather than focusing entirely on restoring domestic fundamentals, the remedy proposed by the DIW chief centers on accelerating European integration. In his view, progress requires a completed capital markets union, a banking union, and a fully integrated single market. Attracting foreign capital through high-profile summits is merely a preliminary gesture. To achieve genuine momentum, the federal government is urged to dismantle protectionist measures that defend domestic enterprises while simultaneously expanding public investment spending.

This enthusiasm for delegating economic vitality to European structures coincides with a surprisingly tolerant attitude toward anti-market experiments at home. Federal Economics Minister Katharina Reiche issued a sharp warning that the incoming red-green-red coalition’s plans in Berlin to socialize private housing enterprises pose a severe threat to the business climate far beyond the capital’s borders. Fratzscher was quick to urge restraint, dismissing such warnings as sweeping judgments that lack substance. While acknowledging a critical stance toward expropriation in principle, he insisted that the municipal paper contains constructive elements, such as commitments to deregulation and boosting scientific research.

This willingness to gloss over ideological attacks on private property while looking to supranational institutions for salvation highlights a broader pattern. Brushing off expropriation debates as minor details, while demanding more government expenditure and EU-wide frameworks, exposes a profound disconnect. Shifting the responsibility for growth to Brussels cannot substitute for fixing domestic framework conditions. It merely transfers Germany’s self-inflicted economic problems onto an even larger and more bureaucratic stage.

Written by Thorben Thiede thorben.thiede@alpineweekly.com