The German government’s recent implosion, culminating in the dramatic dismissal of the finance minister, has sent ripples of concern through Stockholm. Swedish officials are increasingly worried about the potential spillover effects of Germany’s economic stagnation and its perceived inability to implement necessary structural reforms. The German economic model, long reliant on cheap Russian energy, access to the Chinese market, and US security guarantees, is now largely in ruins, leaving the country struggling to find its footing. This instability, particularly in the energy sector, is causing anxiety in Sweden, where high German energy prices are driving up costs in the southern part of the country. Swedish officials express frustration with Germany’s decision to phase out nuclear power without a viable replacement, urging their neighbor to swiftly establish a stable energy system.
Swedish concerns extend beyond energy policy to encompass broader economic stagnation and a perceived lack of reform. High-ranking advisors within the Swedish government have expressed unusually strong criticism of Germany’s economic policies, highlighting a perceived lack of significant reforms even during Angela Merkel’s tenure. They argue that Germany could have done much more to address structural weaknesses and implement necessary reforms, leaving the country ill-equipped to face current challenges. This criticism reflects the gravity of the situation, with Germany’s projected 2024 GDP growth of a mere 0.1% significantly lagging behind the Eurozone average of 0.7%. This stagnation, Swedish officials warn, poses serious consequences for the entire EU, and particularly for Sweden, which counts Germany as its largest trading partner.
While acknowledging the criticism, Swedish officials frame it as a simple observation of the current economic reality. The timing of this critique coincides with Mario Draghi’s assessment of Sweden as a positive example within the European economic landscape. Draghi, known for his efforts in saving the euro and now tasked with revitalizing Europe’s competitiveness, reportedly praised Sweden’s economic model during a recent EU summit. This praise reinforces Sweden’s confidence in its own economic approach and provides a backdrop for its critique of Germany.
Draghi’s recent report on Europe’s declining competitiveness paints a stark picture of a continent falling behind China and the US, posing a threat to prosperity, peace, and freedom. His warning, delivered against the backdrop of Donald Trump’s election, Germany’s governmental crisis, and Volkswagen’s factory closures, underscores the urgency of the situation. Draghi’s message of “invest or perish” resonates within the EU, and Sweden, despite its own economic challenges, sees itself as a model for other European nations.
The Swedish government takes pride in Draghi’s apparent endorsement of their economic model, particularly the high level of private investment in stocks and pension funds, which provide crucial funding for young tech companies. This, they argue, is the kind of investment that Europe desperately needs to remain competitive. Swedish officials point to the fact that their country has more listed companies than France, Germany, and the Netherlands combined, a statistic highlighted by the Financial Times and eagerly embraced by the Swedish government. This, they believe, validates their approach and justifies their criticism of Germany’s economic policies.
Despite facing high unemployment and low growth, Sweden maintains a sense of confidence in its economic model. Swedish officials emphasize their history of successful economic restructuring, particularly during the shipbuilding crisis, as evidence of their ability to adapt and innovate. They argue that Germany needs to address its bureaucratic hurdles, reform its financial market, and implement policies that incentivize working beyond retirement age. They advocate for a stronger focus on the ”work line,” suggesting that Germany’s current system lacks sufficient incentives for labor market participation. This advice, delivered from a position of perceived strength, underscores Sweden’s belief in its own economic model and its desire to see Germany adopt similar reforms.
