This needs to be reduced not by weakening exports but rather by stronger growth in consumer spending. Yet German consumers remain as cautious as ever and continue to squirrel away large amounts of their income.
In any case, weak aggregate demand is not the real problem. There are some more deep-seated factors which give serious cause for concern. For a start, the working age population is falling. In the past, this was mitigated by a substantial drop in unemployment and an increase in the participation rate of women.
With unemployment now standing at about 3pc, there isn’t much scope for this to go any further. Female labour force participation is probably also at about its peak.
Of course, as with other European countries including ourselves, it would be possible to overcome this issue by importing workers from abroad. But politically this does not look palatable, especially given the rise of the right wing AfD party.
Demographics are not everything and it is possible to imagine a surge in productivity growth making up for a contraction of the workforce. But this doesn’t look likely either.
In this country we are used to admiring the structure of the German economy with its wonderful success in export markets and heavy concentration on manufacturing, which still accounts for about 20pc of GDP compared to only 9pc in Britain.
Its prowess was emphasised in the years immediately after the formation of the euro in 1999 when it was widely feared that Germany might have a competitiveness problem against the other euro members. In the event, exactly the opposite transpired.
Germany engaged in an internal devaluation with domestic costs driven down by widespread wage restraint. The result was an enormous trade surplus with Germany’s fellow euro members and the rest of the world.
For all the wonders of the German corporate sector, Germany is far from being the most dynamic or entrepreneurial of economies. It is weak in all matters digital and it has only a small artificial intelligence industry. Moreover, as the benefits of AI wash over all economies in the years to come, it seems likely that Germany will not be one of those best placed to take advantage.
It would be wrong to write Germany off. It has too many underlying strengths to justify such a verdict. And we have been here before. After reunification, Germany was widely derided as the sick man of Europe. Yet it soon bounced back. A repeat of such a resurgence, though, does not seem at all likely.
This has consequences both economic and political. I reckon that over the rest of this decade, German economic growth is likely to be not much more than about 0.5pc per annum. Weak economic growth in Germany will make things more difficult for its trading partners.
More importantly, on the political front, its underlying economic difficulties are likely to make Germany reluctant to take a leadership role in Europe or to support closer integration of the European Union.
Roger Bootle is senior independent adviser to Capital Economics. [email protected]
