GERMAN INDUSTRY MOVES PRODUCTION TO EASTERN EUROPE – ВLOOMBERG

German industry after the peak of development, again in a crisis situation. Trying to rebuild their business, German manufacturers are looking for a favorable space for operations in the countries of Eastern Europe, among which Poland is the leader. There are the first production facilities in Ukraine as well. German industrial production is changing its strategy and moving production outside the country. German business is looking for the labor market and conditions for reducing the cost of production in the countries of the former socialist camp, including Poland and other Eastern European states, writes Bloomberg.

Why is the industrial center of Europe moving production?

The production of industrial products in Germany, which is traditionally considered the center of industrial development in Europe, reached a critical limit in 2017. Since then, according to research, the number and volume of production has been falling rapidly. "Along with global instability, Berlin's political ineptitude is exacerbating long-standing domestic problems such as aging infrastructure, an aging workforce and bureaucratic red tape," Wloomberg writes. Another factor in the sharp decline in production is the reorientation of Chinese industrial consumers, which began during the pandemic. China began to integrate into other markets and the undeclared "economic war" with Germany and other EU countries led to a sharp reduction in the purchase of goods and services.

One of the problems of the economic sustainable development of German industry is the reduction of knowledge in exact sciences. "According to the estimates of the Ifo research institute, the deterioration of mathematical skills will cost the economy approximately 14 trillion euros (15 trillion dollars) by the end of the century," the publication quotes the study of scientists.

Promising directions of transfer of production

Industrial business responds to such challenges in two ways - closing production facilities and reorientation or migration of production to other countries. A promising direction that has become a trend is the direction of production in Eastern European countries, in particular, many new and relocated industrial sites are opening in Poland.

"Bundesbank" believes that there is a problem, but it is not catastrophic

Reviewers of the business edition pay attention to the assessment of the Bundesbank, where it is noted that the adaptation of German industry is slow, but this will not lead to catastrophic consequences for the German economy as a whole. The slow "extinction" of the industrial sector, which is currently less than 20%, will not be able to create a collapse. However, only under the condition that this will happen gradually, according to Bundesbank analysts.

The German defense company Flensburger Fahrzeugbau Gesellschaft has started construction of an armored vehicles service center in Ukraine. "In western Ukraine, Flensburger Fahrzeugbau Gesellschaft is building a repair center for armored vehicles in need of repair, such as Leopard 1, which it supplied," said German MP Markus Faber.

Also, the Bundestag, after a long debate, supported the provision of funds in the 2024 budget for military aid to Ukraine. In the main budget estimate of the most economically powerful country in Europe, 7.6 billion euros are provided for military aid to Ukraine. This is 1.59% of all state expenditures.