The Economics Show

Can Germany escape its economic doldrums? With Ulrike Malmendier

Mar 31, 2025

Ulrike Malmendier, a Professor at UC Berkeley and a key member of Germany's Council of Economic Experts, discusses Germany's economic woes and potential recovery strategies. She highlights the recent loosening of debt limits aimed at revitalizing stagnant growth and the manufacturing sector. Malmendier emphasizes the need for long-term investments and structural reforms, focusing on education and innovation to improve competitiveness. She also reflects on how economic pressures influence the youth, advocating for a hopeful environment amid uncertainty.

32:15

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Ulrike Malmendier

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Quick takeaways

Germany's economy is hindered by structural issues like an aging population and declining manufacturing, necessitating a shift towards innovative industries.

Increased government borrowing for infrastructure investment is crucial, but transparent policies and stakeholder involvement are essential to stimulate business confidence and growth.

Deep dives

Germany's Economic Challenges and Stagnation

The German economy faces significant challenges, which are rooted in long-standing structural issues rather than sudden misfortunes. Key industries such as manufacturing, which once drove economic success, are declining, necessitating a shift toward services and innovative technologies. Additionally, Germany is grappling with a shrinking and aging population, leading to a labor force shortage that hampers economic productivity. High labor costs combined with energy expenses have further complicated the country’s economic landscape, requiring urgent reforms to stimulate growth.

Intro

2min

Navigating Economic Challenges in the US and Germany

14min

Reforming Debt Limits: A Step Towards Economic Recovery?

4min

Germany's Economic Future: Investment and Innovation

11min

Navigating Uncertainty: The Impact of Formative Experiences on Youth

2min

Fostering Hope and Change for a New Generation

2min

For the past few years, Germany has begun to look like the ‘sick man of Europe’ again. Its economy has barely grown since 2019, while its famous manufacturing sector has shrivelled. But earlier this month, financial markets were buoyed by a vote in the German parliament to relax the constitutional limit on government borrowing, the so-called debt brake. It means that Germany’s likely new conservative-led coalition government will be free to borrow unlimited amounts to fund a defence sector build-up, and can also draw on a €500bn fund to spend on infrastructure over the next 10 years. But will more government spending be enough to address Germany’s structural economic problems? The FT’s Martin Sandbu speaks to economist Ulrike Malmendier of the University of California, Berkeley, who is a member of the German Council of Economics Experts, which evaluates the government’s economic policies.

Martin Sandbu writes a regular column for the Financial Times, which you can find here. It includes recent columns on Berlin’s about-turn on debt spending, and the economic choice facing Germany.

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Presented by Martin Sandbu. Produced by Laurence Knight. Manuela Saragosa is the executive producer. Audio mix and original music by Breen Turner. The FT’s head of audio is Cheryl Brumley.

Read a transcript of this episode on FT.com

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