Germany seems to be undergoing a 'fundamental disintegration' in terms of direct financial commitments.
Investments directly into Germany have took a nosedive as of late, as suggested by information from the Bundesbank. A specialist article published ahead of their monthly report claims, "Additional funding from other eurozone countries has been minimal since the end of 2021." Although investments from nations outside the eurozone continue to be positive, they've significantly dwindled from the period between the end of 2019 and the end of 2021.
Approximately 100 billion euros were invested by foreign companies in participation capital in Germany during the years 2020 and 2021. However, just around 62 billion euros followed suit until mid-2024. The advance copy indicates, "In actuality, a statistically significant break in structure is evident in 2022, leading to a significant decrease in direct investments into Germany."
Before and after this structural break, direct investors from the USA and the Netherlands held significant positions. However, investments from the UK have considerably declined in the past two and a half years, according to the Bundesbank. They speculate that the UK's exit from the EU on January 31, 2020, may have had a part in this.
The Bundebank hasn't been able to pinpoint the reasons for reduced direct investments into Germany since 2022 with absolute certainty. "Nonetheless, high energy prices within the country could be a factor, as is the case with German investments abroad. Both cyclical and structural factors are at play."
The intense contest for foreign investments, particularly in forward-thinking and strategically critical sectors, is also noteworthy. "In the years to come, Germany and Europe must demonstrate their international competitiveness and ability to attract foreign capital," the advance copy concludes.
Despite the reduced direct investments from the UK after their EU exit, Germany continues to attract investments from other countries. For instance, the USA and the Netherlands have maintained significant positions in investments directly into Germany.
