Marcel Fratzscher surprises with new theory: Climate change is to blame for the German economic crisis

The German economy has been shrinking for three years. Economic growth is currently expected to be zero percent this year. Some experts even predict a decline of 0.2 percent. While many experts blame structural problems, such as extremely high energy prices and a lack of investment, economist Marcel Fratzscher appears to have found another theory for the ongoing deindustrialization: climate change.

Fratzscher, political consultant and president of the German Institute for Economic Research (DIW) in Berlin, presents his theory in a column in Die Zeit . In his article "The Underestimated Threat to German Industry," the economist explains that "it is not the energy transition that is endangering competitiveness."

“Investments postponed or relocated abroad due to climate risks”

Germany's economic position is under threat because the earth is getting warmer: "The data is clear: heat, drought, storms, and natural disasters are increasingly and irreversibly undermining the foundations of the German economy." Fratzscher remains unclear as to which data he is referring to. No source or specific figures are provided.

In connection with supply chains , the "backbone of the industry," studies are also mentioned that clearly show that "extreme weather such as prolonged drought or heavy rain have already caused billions in damage." Fratzscher then cites a concrete example: "The Rhine low-water crisis of 2018 resulted in additional costs of €250 million for BASF alone."

At that time, the water level of the Rhine in the town of Kaub fell to "below 30 centimeters," so that transport capacity had to be drastically reduced – "by up to 80 percent." Further in the text, Fratzscher refers to data from the Thünen Institute. According to this data, "grain and maize yields fell by an average of up to 25 percent in the drought years of 2018, 2019, and 2022." This resulted in material damage of around 3.6 billion euros for 2022.

The steadily rising costs, which Fratzscher argues are attributable to climate change , are causing companies to relocate abroad: "Companies are increasingly questioning whether Germany still offers the necessary infrastructure, resilience, and planning security." Fratzscher reinforces his thesis by referring to a survey conducted by his own institute: "47 percent of the industrial companies surveyed stated that they had postponed or relocated investments abroad due to climate risks."

The DIW receives several million euros in state funding annually

The President of the DIW – which receives a large portion of its public funding from the Berlin Senate Department for Science, Research and Culture as well as from the Federal Ministries of Economics and Labor – appeals to politicians: "Many economic and industrial policy debates fall short because they treat climate change as a purely ecological problem."

The real reason for the German economic downturn is "the lack of a decisive adaptation to ecological reality." Marcel Fratzscher calls for a "change of course in climate and industrial policy" and a "wise use of the federal government's 500 billion euro special fund."