At the end of the 1990s, the German economy was considered to be sclerotic, and the Federal Republic was seen as the "sick man of Europe". High structural unemployment was a burden on social security funds, and competitiveness and the quality of the location were at rock bottom. With the reforms of "Agenda 2010", then Chancellor Gerhard Schröder turned the tide at the beginning of the 2000s. The country returned to its strengths, the welfare state was trimmed, and growth returned. Germany became Europe's driving force again.

Today, too, the German economy is in need of such a course correction: growth is not getting back on its feet, the country is rapidly losing its attractiveness as a business location, and high inflation has shaken the confidence of many people in a prosperous future. Concerns about a loss of control are also spreading in the wake of the migration crisis and domestic political problems, which, coupled with the already existing economic fears, is creating a dangerous political mix.

The decades-long practice of simply pasting over every crisis and every structural change with more and more money – either described as a bazooka, whammy, or double whammy – and simply sitting out the end of the crisis has long ceased to be effective. This will not make a community more resilient. And people are feeling it. There is an increasing lack of clear perspectives and resilient visions for a Germany in a multipolar, unpeaceful and economically changing world, which should actually be reflected in economic reforms and fiscal structural changes. Especially as previous policies have long since bled the state dry financially. The recent crises could only be financed through a series of shadow budgets.

The situation has become even worse under the governing coalition. Although a "climate strategy" has been proclaimed as the common thread running through government action, a master plan and a concrete step-by-step plan tailored to it have been sought in vain. Instead, the minutiae of the many individual measures and the micromanagement seeping into all sectors resembles a patchwork policy that does not even begin to hint at the big picture.

Once again, industrial policy is supposed to provide the impetus because more market-orientated instruments are probably too slow for the actors involved, possibly delivering the "wrong" results from their point of view, and large project funding programmes are simply easier to stage in public. Once again, the government believes it knows more about the future than the companies competing in innovative markets.

And that has consequences: The Heating Act initially focussed on a single technology, the heat pump, without taking into account the necessary supply of cheap electricity and the number of tradespeople available. After the nuclear power plants, the coal-fired power plants are also to be shut down without the necessary storage facilities for renewable electricity being available or long-distance power lines being built. Billions are also being spent on encouraging people to adopt appropriate environmental behaviour and on socially cushioning the harmful economic side effects of our own laws.

Industrial policy is also celebrating a renaissance in other economic sectors: in order to become less dependent on China, chip and semiconductor factories are being lured with state money and subsidised to the tune of billions. Other, smaller, possibly more innovative and forward-looking start-ups and companies are left empty-handed.

At the same time, general location factors are being dramatically neglected: according to the report by the International Institute for Management Development (IMD) in Lausanne, Germany has lost a huge amount of competitiveness since 2014 and has fallen from 6th to 22nd place. In light of this, companies are already planning to relocate production abroad, as surveys by management consultants Deloitte and studies by the Centre for European Economic Research (ZEW) show.

However, a decisive negative location factor alongside the high tax burden, the continuing spread of crippling bureaucracy, rising labour costs and the shortage of skilled workers is the implementation of the German climate transformation itself. The Wall Street Journal (WSJ) described the simultaneous phase-out of nuclear and coal-fired power generation without a ready concept for the introduction of a stable renewable infrastructure as early as 2019 as the "world's dumbest energy policy".

People feel this because the price of electricity continues to rise, which in turn leads to calls for a brake on electricity prices and billions in aid are needed to shield the industry from the worst consequences. At the same time, it will be necessary to import nuclear power from France, which is only regarded as "toxic" in Germany but is celebrated as "green" elsewhere and, on top of that, a new nuclear power renaissance is being proclaimed worldwide. This is deeply unsettling for citizens, causing them to doubt Berlin's expertise, undermining the positive basic sentiment in favour of the ecological restructuring of the German economy, and is also a breeding ground for increasing resentment towards the political system as a whole.

As a result of the Federal Constitutional Court ruling on the climate fund, which has blocked the federal government's access to the "money coffers" transferred from the coronavirus era, the traffic light coalition must now make do with the available tax revenue for the 2024 budget – which is no small amount. After all, tax revenues are currently the highest that have ever been demanded from citizens, both in absolute terms and relative to value creation. However, subsidy expenditure has also reached record levels – and the government's investment ratio has fallen to a record low. This imbalance should be addressed first.

There was also great hope that the budgetary difficulties would ultimately lead to a structural rethinking. It would be urgent to refocus on more growth and location quality and thus competitiveness through better framework conditions in order to then use this as a basis for driving forward the ecological transformation. Especially as this is naturally easier to implement in a growth phase than under the current conditions.

But far from it! The decisions of the so-called traffic light coalition are a continuation of the previous thought patterns: industrial policy and micromanagement continue. Everywhere, only a little more is being saved. Moreover, some things are calculated so tightly that a new "budget emergency" is almost foreseeable in order to be able to suspend the debt brake again.

However, there is also a glimmer of hope in the budget compromise reached before Christmas 2023: the CO2 levy will be much higher than previously planned. This is currently being vilified by the public exclusively as a cost increase for consumers, and a phalanx of commentators is castigating the associated price increases for the economy and households. But this is the only way the climate turnaround will actually succeed: If the economy and private households react to price signals and change their behaviour step by step. This is because the instrument does not specify precisely how the greenhouse effect of production and consumption is to be reduced but leaves this to the market, which always finds the most cost-effective way. This is not only cheaper for the state but ultimately also for private households and the economy. Any social distortions can then be offset by the promised climate money, for example, which is currently being spent on permanent subsidies for industrial processes that are no longer competitive.

It is doubtful whether the governing coalition is really behind the mechanism of the CO2 levy. So far, it has only brought a less stringent version of the levy into play, and apparently only to persuade homeowners to install a heat pump by warning them of rising gas prices.

But sometimes, necessity makes you smarter. And so we can only hope that the realisation of the need for an even more far-reaching political and economic course correction analogous to "Agenda 2010" will spread after all. Experience has shown that in the past, a policy of restrictions and prohibitions has never led to growth spurts, let alone to a system metamorphosis such as climate transformation. Instead, it was always the more liberal phases that gave the economy courage and opened up new opportunities. And especially in times of technological change (robots, digitalisation, artificial intelligence), more freedom and a willingness to experiment are even more important! A clear signal of new beginnings would not only make Germany economically and ecologically attractive again but would also stabilise our democracy, which is now said to be too slow, too indefinite and too weak. Yet the adaptability and versatility of this form of government were once its hallmarks in contrast to the ossified autocracies.