Germany’s economy can still hold surprises (and attract investments)

26 March 2024 - 13:00

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Germany can surprise economists and attract investments: this is the optimistic vision of a Goldman Sachs expert. Why focus on Berlin?

Germany's economy can still hold surprises (and attract investments)

Germany can still surprise on the positive side, and investor sentiment is finally changing.

This is what emerged from an assessment expressed on Bloomberg by Dan Dees, co-head of global banking and markets at Goldman Sachs. According to him, conditions for new industrial deals have begun to improve, German companies are exploring options to expand – albeit in the United States – and the startup scene is booming and vibrant.

In summary, the German economy may still be in dire straits, but investors are starting to change their tune.

Why investors are still betting on Germany

Germany has struggled - and still struggles - to relaunch its economy after the energy crisis, weakening global demand and long-neglected structural challenges, such as an outdated bureaucracy and aging workforce. The list of problems has raised questions about the country’s ability to remain competitive and attract investment.

Now, amid signs that the ECB may cut interest rates in the coming months, German investor confidence is back on the rise, reaching its highest level in more than two years this month. Reducing financing costs would be a key catalyst in convincing companies to increase technology spending on, for example, process automation and artificial intelligence, areas that Dees says German executives are keen to support.

The mood among executives at German industrial companies is constructive, but decidedly more sober than the optimism of their colleagues in the United States...”, Dees told Bloomberg News in a recent interview.

The expert just returned from a visit to Goldman Sachs’ office in Frankfurt and its newly opened branch in Munich, where he said that a growing number of tech startups - operating in artificial intelligence, technology healthcare, and gaming - promise to spur deal flow and massive investment in infrastructure.

Several analysts say that Germany is in the midst of a recession after a contraction in Q4 of last year and, according to their forecast, in the first quarter of 2024. The country’s recent poor economic performance – lagging behind all the others in the G7 – he revived the nomination as the “sick man of Europe”, used to describe Germany’s anemic growth at the beginning of the century before structural reforms were implemented.

Dees, however, rejected this view, saying that the general sentiment among German executives, asset managers, and startup founders “was better than I expected”.

For example, TSMC is currently building a chip factory in Germany, and the federal government in Berlin is also in advanced talks to buy the domestic business of Dutch network operator Tennet in a deal that could be valued at around 22 billion euros (24 billion dollars).

Germany and all of Europe, however, have room for relaunch. “Europe is one of the most advanced continents regarding mobility, telephones, and fiber connectivity, so data use is needed. We are just far behind…but there is a tremendous growth story ahead of Europe and data center infrastructure”, commented Raj Agrawal, global head of infrastructure at KKR & Co

Original article published on Italy 2024-03-23 12:23:08. Original title: Perché la Germania può sorprendere (e attrarre investimenti)

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