Germany is Europe’s biggest economy, the most populous country on the continent, and is pretty much indisputably in charge.
For right or wrong, nobody’s confused as to which of the European Union’s capital cities wears the trousers. If Berlin isn’t on board with something, chances are that it’s not happening.
That’s the way things have worked for a long time, especially since the euro crisis.
But it’s not necessarily always going to be that way.
Earlier today, the European Commission published a report that shows perhaps the biggest threat to Germany’s heavyweight champion status in Europe.
Here’s the reason, pretty much as clearly as it can be laid out: Germany is shrinking.
The bar on the right hand side there (and the dark blue line) is the raw number of people each country is projected to gain or lose. And by 2060 the EU is projecting that Germany will have 10 million fewer inhabitants than it does now.
Over the same period, Italy and France are predicted to pick up about 5 million and 10 million respectively. That’s not rapid population growth, but it’s on a different scale to Germany’s. Of the major economies in Europe, the UK is expected to have by far the least demographic challenges — adding more than 15 million people.
As the EU stands now, that would make Germany the third biggest country by population, sliding from the top spot now. With a projected population of just 70.8 million in 2060, Germany will be well behind the UK’s 80.1 million and France’s 75.7 million.
It’s good to treat projections about nations that stretch 45 years into the future with scepticism, but demographics are genuinely very difficult to turn around. Fertility rates do not easily change direction and it’s hard to simply whip up some new children — without huge waves of migration or some unprecented cultural shifts, Germany is a nation on the decline.
This has a number of implications for Germany, and few of them are particularly healthy. A shrinking population in an advanced economy is usually an ageing economy, and Germany is no exception.
That means that the 10 million population decline actually understates the fall in the working age population (those aged 15-64), which is likely to be more like 15 million. By the same measure, the number of potential workers in the UK will rise by 5 million.
Germany’s potential GDP growth would be just 0.9%, half of the UK’s 1.8%, or France’s 1.7%.
An extra 3% of Germany’s GDP would be spent on pensions and healthcare compared to today, in comparison to 2% in the UK. The differences sound very small, but compounded year-on-year, they’re genuinely significant.
Germany is riding high now. When there’s a European question, it tends to get a German answer. But that’s not guaranteed forever. If the country continues the trend it’s on today, a slow but downward slide in influence could easily follow.