The Wall Street Journal shows that German businesses have piled up $500 billion in cash and deposits leading to underinvestment in German industry.
FRANKFURT—German companies are sitting on a half-trillion dollars of cash but are reluctant to invest it in their own country, potentially threatening the country’s competitive edge and European economic growth.
Germany’s nonfinancial businesses have saved more than they have invested for the past seven years, piling up about €455 billion ($500.4 billion) in cash and deposits, German central bank data show.
Over the past decade, German companies have grown more enthusiastic about investing abroad than at home, according to a recent survey of more than 300 large German firms by the country’s state-owned development bank KfW. They see better growth opportunities abroad, partly because Germany’s shrinking and aging population.
Corporate savings, added to those of German households and the government, mean the country overall saves far more than it invests, and lends the excess savings abroad. Last year that imbalance—called the current-account surplus—reached 8.5% of gross domestic product, or €257 billion. It is forecast to increase this year. By comparison, the U.S. and the U.K. ran current-account deficits last year.
“Germany is massively wasting its potential to grow,” said Martin Gornig, an economist at the German Institute for Economic Research in Berlin, noting companies in the U.S. and China have more aggressively modernized their production facilities.
Latest posts by Dick Young (see all)
- Four Ways to Win the Investment Horse Race - October 11, 2019
- This is the Most Persuasive Test of High-Quality Investing: Does Your Portfolio Pass? - October 4, 2019
- Are You Confused by the Investment Hype? - September 27, 2019