If Germany can’t count on old friends, perhaps it’s time to make new ones

Indian Prime Minister Narendra Modi and Angela Merkel, Germany's Chancellor meet in BerlinImage copyright

It was no doubt planned many months ago, but the timing of Narendra Modi’s short tête-à-tête with Angela Merkel in Berlin on Tuesday will be interpreted as deeply symbolic in Germany and beyond. Could there be something of a pivot to Asia going on in Europe’s economic powerhouse?

The Indian prime minister arrived in Europe after what has already been something of a whirlwind few days for Germany’s chancellor.

First there was a tense Nato summit in Brussels, followed by, to use Frau Merkel’s understated phrasing, a “very difficult” G7 summit in Italy, where differences over climate change were particularly apparent.

Then on Sunday, in a Bavarian beer tent, Mrs Merkel made the remarkable pronouncement that Germany could no longer rely on its long-standing partners – for which read: Brexit-Britain and Donald Trump’s America.

It’s telling, though, that Mrs Merkel’s remarks were covered with more fanfare abroad than they were in the Germany’s domestic press, where they were largely recognised as a deft piece of electioneering.

She wants to make clear she’s as prepared as anyone else to stand up to Trump, who reiterated past criticisms on Tuesday with his tweet: “We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO military. Very bad for U.S. This will change”.

But while things may have come to a head this week, Germany’s business community had already been slowly coming to the conclusion that it may – regrettably – be time to seek new friends.

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Berlin’s old partners are still of supreme importance, of course. Germany exports more to the US and UK than it does to India, China, Korea and Japan combined. And despite the warm handshakes, photo-ops and memorandums of understanding announced this week, the EU is still some distance from signing a free trade agreement with Narendra Modi’s government.

But a quick glance at the diary of Germany’s economics minister, Brigitte Zypries, or the schedules of some of the country’s largest business lobbies tell a different tale: one in which Asian economies are mentioned frequently and enthusiastically, while the US and UK are often referred to in muted, disappointed terms.

You can’t move for “Sino-German” business conferences in Berlin and Brussels these days, and large, enthusiastic Chinese delegations are a common sight at many of Germany’s famous trade fairs. The Chinese premier’s visit later this week, comes after years of concerted effort to build ties between Germany, the EU and Xi Jinping’s administration.

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Yet Germany’s eager embrace of rapidly-developing economies has another, less discussed, motive. The country needs new, young, collaborators to help it move forward.

The unwelcome truth is that Germany’s rather traditional businesses are lagging behind in areas such as digital innovation, and are slow to adapt to the fluid working practices of a globalised world. And when it comes to public investment, Germany is playing catch-up.

Its economy is booming, but much of its infrastructure is crumbling. Its schools are underfunded and it’s failing to train enough high-skilled workers – there are hundreds of thousands of professional vacancies at German companies.

Its digital systems are ailing, and in some cases non-existent (particularly in the Mittelstand – medium-sized, often family-owned enterprises).

The so-called “clean energy transition” has failed to bring down emissions – the level of greenhouse gasses has actually increased, and Germany still relies heavily on lignite, among the dirtiest of coals. A target to bring one million electric cars to the streets of Germany will almost certainly be missed.

The “Made in Germany” brand continues to be damaged by the never-ending “dieselgate” saga, over Volkswagen’s manipulation of car emissions tests. Unemployment is low, but people in work are paying higher taxes; since 2004, the total number of tax payers paying a rate of 42% has doubled.

These problems are compounded by the country’s deep-seated antipathy to debt, at least under the current coalition, which has prioritised balancing the budget over increasing public investment to help with the future-proofing of the German economy.

As Mrs Merkel seeks to be re-elected for a record fourth term, the above issues will serve as ammunition for her opponents, particularly the SPD’s Martin Schulz, who will be asking why the benefits of Germany’s incessant growth are not as widespread as they could be.

And if the Chancellor is forced to lead from the front in the battle against protectionism, who Germany’s friends are, new or old, may turn out to be more significant than expected.

You can follow Joe Miller on Twitter, @JoeMillerJr