Advertisement
UK markets open in 3 hours 42 minutes
  • NIKKEI 225

    38,329.39
    +777.23 (+2.07%)
     
  • HANG SENG

    17,109.69
    +280.76 (+1.67%)
     
  • CRUDE OIL

    83.34
    -0.02 (-0.02%)
     
  • GOLD FUTURES

    2,335.20
    -6.90 (-0.29%)
     
  • DOW

    38,503.69
    +263.71 (+0.69%)
     
  • Bitcoin GBP

    53,536.03
    -89.09 (-0.17%)
     
  • CMC Crypto 200

    1,433.25
    +18.49 (+1.31%)
     
  • NASDAQ Composite

    15,696.64
    +245.33 (+1.59%)
     
  • UK FTSE All Share

    4,378.75
    +16.15 (+0.37%)
     

Why Germany is (literally) the sick man of Europe

Germany Sick Economy
Germany Sick Economy

Germany isn’t sick, it’s just tired. Finance minister Christian Lindner’s diagnosis was an attempt to downplay suggestions that the country is once again becoming the sick man of Europe.

Russia’s invasion of Ukraine, an era of deglobalisation and geopolitical tensions have threatened the foundations of its economic model.

Much discussion of the country’s malaise has centred on soaring energy costs and its net zero budget crisis, while there may be some truth to Lindner’s comments in Davos last month that “after a very successful period since 2012... Germany is a tired man after a short night”.

However, Germans themselves have literally never been so sick – and it’s becoming one of the biggest drags on the economy.

ADVERTISEMENT

German employees took an average of 19.4 sick days in 2023, according to TK, one of the country’s biggest health insurers. This is the highest number since it began collecting data at the start of 2000.

By comparison, the average number of sick days in 2019 was around 15 per employee.

It might not sound like a huge jump, but those extra days add up. The equivalent number for the UK is around six days, according to the Office for National Statistics.

A separate study this year by pharmaceutical trade group VFA showed 158 million working days were lost to sickness in Germany in 2022. With similar sickness levels last year, VFA calculated that it had wiped €26bn (£22bn) off Europe’s largest economy in 2023 – knocking 0.8 percentage points off annual gross domestic product (GDP).

In other words, if Germans weren’t so sick, the economy would have grown in 2023, and would not have been the worst-performing one in the G7. That accolade would have gone to the UK, which is dealing with its own worklessness crisis. Instead, Germany shrank by 0.3pc.

The trade group also noted that sickness in Germany was among the highest in the developed world, surpassing levels in Canada, America, Sweden and Australia on a like-for-like basis.

These indicators are symptoms of a wider malaise. While overall economic activity in Germany remains lower than in the UK, inactivity among older Germans has climbed since the pandemic.

And although – unlike in Britain – employment has surpassed pre-pandemic levels, the average number of hours worked has not.

So why are Germans so much sicker than they used to be?

Susanne Wanger at Germany’s Institute for Employment Research (IAB), says weakened immune systems are partly to blame. Strict Covid lockdowns meant “there were practically no flu epidemics in 2020 and 2021, which weakened the population’s defense system against these pathogens”, she says.

“When people were increasingly exposed to such pathogens again when the protective measures were lifted, this led to more illnesses and sick days than usual.”

Wanger says this made people more cautious, with the pandemic leading to “behavioural changes” among employees who are now “more sensitive to the risk of infection in the event of illness in order to protect colleagues”.

Respiratory illnesses that aren’t Covid are the most common reason for calling in sick in Germany. But it’s not just coughs and colds that have risen sharply.

Wanger notes that the number of sick days taken for mental health reasons has almost doubled since 2000, and are “of particular importance in the long-term increase compared to other types of illness”.

The rise in mental health disorders has also lengthened the average time that people are signed off sick.

Dirk Rennert at insurance fund BKK notes that the average time people are signed off sick for mental disorders in Germany is six weeks. He says: “It means even a small increase in the number of cases has a disproportionately high effect on the average number of sick days.”

Germany’s ageing workforce also means musculoskeletal disorders are also on the rise, as older people tend to have more aches and pains.

Wanger says demographics is a key factor behind Germany’s sickness problem.

“The sickness rate increases significantly with age,” she says. “This is mainly because the average duration of cases of incapacity for work increases continuously.

“Older people are therefore not necessarily sick more often, but they are generally absent from work for longer when they fall ill. In addition, older employees are more frequently affected by several illnesses at the same time.”

This grim reality is increasingly borne out in the data. While retail sales in Germany have stalled, money spent at pharmacies has surged as people seek treatment for more ailments and caution brings out the hypochondriacs.

Labour shortages in Germany are also playing a role as a lack of staff puts increasing pressure on those already in a job.

A survey conducted by the DIHK Chamber of Commerce and Industry last November showed half of German companies are struggling to fill vacancies because of labour shortages, which the group said was costing the economy €90bn a year – or 2pc of the economy.

“There are some professions where the sickness rate is particularly high, like geriatric care, which is also due to the above-average stress levels in the profession,” says Rennert at insurance fund BKK.

“We also expect a steady increase in the coming years. As long as there are no far-reaching changes to the health-promoting design of work, this will not change any time soon.”

Simon Junker, at pharmaceutical trade group VFA, reminds us that this comes “on top of the demographic impact that we’re already experiencing right now, which is accelerating and means it’s going to be much worse in the coming years than now”.

Junker also suggests tensions between employers and employees over working from home could be to blame.

While he stresses that he has no concrete evidence, Junker adds that some workers may be calling in sick in protest at being hauled back to the office.

“People are used to a home office, they’ve embraced it. If the employer forces them back, they may be much more inclined to, if the chance arises, to signal that they are sick, maybe,” he says.

Germany’s finance minister Lindner may have joked that all the country needs to cure its malaise is a “good cup of coffee”, what he actually means is “structural reforms” which are a little more difficult to brew than a flat white or cappuccino.

After all, reversing a demographic decline or finding newer ways of working doesn’t happen overnight – or even without unrest.

Junker says that while the most acute phase of the energy crisis is likely to pass at some stage.

“It’s a good thing to start with a good cup of coffee,” he says.

“Germany has an unusually high level of sickness, and we have to deal with that. We don’t yet know if it’s a structural new normal – there is a chance that we will recover and return to normal.

“Either way, I welcome that cup of coffee.”