Germany is a sick man because disease cripples the economy

German officials insist their economy doesn't deserve the „sick man of Europe” label, but a new study suggests illness may actually be playing a role in its poor performance.

Gross domestic product would have risen 0.5% last year if unemployment due to poor health had not been excluded – a record that would have surpassed the number of infections in 2023, according to an analysis by VFA, the country's research-based association. Pharmaceutical companies.

Illness among employees has cost 26 billion euros in lost real income — equivalent to 0.8 percentage point of gross output, economists Klaus Michelson and Simon Juncker wrote in a report on Friday. The highs seen in November and December indicate another hit in the current quarter as well.

The German economy is projected to contract by 0.3% in 2023, its worst performance in two decades except for the financial crisis of 2009 and 2020, when the pandemic hit. Its underperformance compared to its regional peers was so pronounced that it prompted the label „the sick man of Europe” that was used to describe it a quarter of a century ago.

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Bundesbank President Joachim Nagel has rejected the comparison, and last week, Finance Minister Christian Lindner insisted the country was like a tired man in need of coffee.

„In 2023, Germany will be a 'sick man' in the truest sense of the word – its economic performance will be significantly affected by the wave of disease than any other country,” Michelson and Junker wrote. „What is also true is that Germany's economy faces significant structural problems and major challenges in international competition.”

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They say significant investments in sanitation and prevention are also needed.

The study shows the economy could lose the equivalent of 350,000 workers if sickness absence recorded in the past two years becomes the new normal. That number doubles when you factor in some overtime and productivity improvements.

„A country that is already struggling with the problems of demographic transition should not allow it to happen forever,” Michelson and Juncker said.

©2024 Bloomberg LP

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