The cause of this stagnation is an extremely conservative approach to managing money: Germans avoid stock-market risk, preferring traditional bank accounts and, above all, real-estate investments. This model of "setting capital in concrete" is, however, becoming less and less efficient in the face of unfavourable demographic changes and economic stagnation.
The demographic crisis strikes directly at the foundation of German wealth, which is the real-estate market. The decline in population and the lack of an inflow of new, dynamic capital mean that investments in "concrete" are ceasing to deliver the expected returns.
Although migration temporarily stimulated demand for housing, it was unable to offset the internal regression. German money remains trapped in real estate, while new social groups – both young Germans and immigrants – lack sufficient purchasing power to revive the market.
As a result, German society is regressing in terms of wealth, unable to adapt to the modern mechanisms of growing capital that the citizens of the USA employ with such success.
In parallel with the problems of private fortunes, the German state is sinking into record debt, masked by complex financial operations.
Berlin created so-called special funds with a combined value of nearly a trillion euros, earmarked for the modernisation of the Bundeswehr and for infrastructure. These resources sit outside the official budget, which allows Germany to maintain the image of a state that takes care of financial discipline, while in reality it is borrowing up to the hilt.
Such a legal arrangement, however, gives rise to numerous pathologies. Investment funds are often smuggled in to cover current budgetary expenditure instead of serving their planned purposes, such as building new schools or roads.
In the coming years, servicing this debt alone may consume every fifth euro derived from taxes.
The main burden on German public finances is becoming the rapidly rising social spending, especially that related to the pension system and care for the elderly.
These costs have become almost impossible to bear, and attempts to curb them run into constitutional barriers.
In public debate, the demand to cut benefits for migrants appears more and more frequently; however, experts point out that without a constitutional majority and an amendment to the Basic Law, such measures would be immediately blocked by the Constitutional Tribunal.
An additional problem is the inefficiency of the administration. The ministries are unable to prepare investment projects that would allow for the effective use of the resources from the special funds, which leads to the squandering of billions of euros.
The German economic model, based on real estate and hidden debt, is exhausting its potential for development.
Rising social costs, combined with demographic decline and the decision-making paralysis of the administration, create a dangerous mixture that threatens a permanent reduction in the level of society's prosperity.
At the same time, the absence of structural reforms and the flight into creative budgetary accounting are driving Germany further away from modern market economies.
