The chorus of critics regarding Germany as a business location is as loud as it is diverse these days. Wage costs, energy costs, material costs – Germany leads in terms of expenses, lament economic institutes and associations. Even companies that can still withstand the cost pressures are driven away by excessive bureaucracy. The result: German companies are on a detour abroad, and Germany's economy lags behind as the slowest in Europe.

However, this internal picture of despair contrasts sharply with how Germany is perceived abroad, where investors dismiss the myth of the „sick man of Europe“ as a fairy tale, or even bluntly as „bullshit“. In fact, German companies are highly sought after. This is the flipside of the concerning wave of takeovers currently involving heavyweights like Covestro and Commerzbank – both DAX constituents – as well as suppliers, logistics firms, and various mid-sized companies, evoking the notion of a „sell-out“.

Even from this perspective, there are compelling arguments in favour of Germany. Despite all the turmoil surrounding an increasingly fragmented political spectrum and a supposed shift to the right, the political environment is still viewed as very stable. High-quality education, skilled labour, research excellence, and innovation strength – these are the attributes that matter, not just for investors but also for many domestic companies, particularly the broad middle-market sector. These firms are thriving in Germany, producing locally, allocating capital, and thus offering a stark contrast to the woes of some of the domestic global players. The latter are busy reframing self-inflicted crises as location issues, though they are primarily responsible for high personnel costs, poor governance structures, and strategic errors – illustrated by the example of VW and the automotive sector as a whole.

Self-inflicted problems, as opposed to location factors, become especially apparent when struggling companies are contrasted with industry leaders. In the auto parts sector, heavily impacted by the shift to e-mobility, there are still companies that remain financially healthy and growing. And in another sector, the struggling Meyer Werft contrasts with the success of Fr. Lürssen. The difficulties of individual companies should not be seen as indicative of an entire industry.

For the Mittelstand, which is often viewed as the backbone of the German economy, leadership in performance and technology has traditionally been the key competitive factor, helping to offset cost disadvantages on an international scale. However, in a time of technological upheaval, driven by the significant push for a climate-friendly transformation, many companies are losing their competitive edge. This is especially true for German auto suppliers and parts of the machinery sector, which must reposition themselves in light of e-mobility. Yet, claiming that the energy transition has caused only damage ignores the reality of many companies that have benefited from it, whether in wind and solar energy, or the hydrogen industry, which plays a key role and is recognised internationally as a flagship industry.

In fact, many young companies and established mid-sized firms are doing well in Germany. That doesn't mean everything is perfect. As debates over immigration limits dominate the political scene, many service providers in Germany fear a shortage of workers. And while there are loud discussions about the risks of AI, many mid-sized firms are still struggling to catch up with digitalization. But a few aches and pains don't make a man completely ill.