Despite the fact that Germany experienced a recession in the first quarter of 2023, Jasmin Groeschl, senior economist for Europe at Allianz, said there are "significant differences" between the situation now and when it was Europe's "sick man."
Although some economists aren't sure it's a fair and true assessment of Europe's largest economy, Germany has been gradually recovering the unflattering moniker "the sick man of Europe" in recent weeks.

When the nation was attempting to deal with the expensive difficulties of a post-unification economy, Germany was first referred to as such in 1998. In the present day, the IMF predicts that the German economy will contract in 2023, making it the only G7 economy to do so formally. This has led to the nick-name resurfacing in a number of media sites.

But is this true of Europe's largest economy?

According to Holger Schmieding, chief economist at Berenberg Economics, "to call an economy with record employment, a large number of job openings, and the best physical position of almost all major economies in the world" just does not suit.

They have unquestionably not erred to the point where that title would be appropriate, Schmieding continued.

According to Jasmin Groeschl, senior economist for Europe at Allianz, there are "major differences" between Germany now and its previous time serving as Europe's "sick man," including pressures from external geopolitical challenges and a global economic slowdown. Germany entered recession in the first quarter of 2023.

The problems affecting Germany's economy may be broken down into "two very separate battles," according to Stefan Kooths, research director for business cycles and growth at the Kiel Institute for World Economy, who spoke with CNBC.

He noted that there are both short-term cyclical problems, many of which are a result of the state of the world economy, and longer-term structural challenges that originate in Germany.

difficulties with short-term cycles
According to Carsten Brzeski, global head of macro research and chief economist for the euro zone at ING Research, the cyclical headwinds Germany's economy is currently facing are a significant divergence from its circumstances in the 1990s and the early 2000s.

It is impacting industrial nations throughout the world since China's Covid-19 reopening earlier this year didn't provide the rebound that many were hoped for. Higher interest rates and rising energy prices are also having an impact.

According to Brzeski, "It is a different illness [than] 20 years ago."

While other nations, like France, are considerably more dependent on service exports, which are thriving in a post-pandemic world, Germany, for example, exports are mostly in sectors that rise and fall with the overall economy, such as cars, machinery, tools, and chemicals.

German exports are stuttering, according to Groeschl, which is why the country is having trouble.

Germany announced a foreign trade imbalance of 1 billion euros ($1.03 billion) for May 2022, the first time in decades the country imported more than it exported.

The federal statistics office reports that Germany has since returned to a trade surplus, which in June totaled 18.7 billion euros, but exports are still sluggish. Only 0.1% more items were exported in June than the previous month, and 1.9% less goods were exported in June 2022.

The German Federal Statistics Office reports that month-over-month exports to China fell by 5.9% to 8.2 billion euros in June.

persistent structural problems
According to economists who talked to CNBC, the German economy is also experiencing longer-term structural issues that must be fixed if the nation is to shed its reputation as a "sick man" along with these cyclical headwinds.

Joerg Kraemer, chief economist at Commerzbank, told CNBC via email that Germany needs lower business taxes, less red tape, quicker approval processes, greater investment in roads, bridges, and digital infrastructure, competitive electricity pricing, and better schools.

"There is no credible comprehensive reform package to address the underlying causes of Germany's economic underperformance," he continued. 

When approached by CNBC, a government representative declined to comment on the remarks made in this report.

Pension issues
Since 1991, the number of hours worked in Germany has decreased, and the Kiel Institute predicts that this trend will continue in 2019. This has an adverse effect on Germany's ability to thrive, according to Kooths.

The legacy we have, which is the increasing number of people who must be maintained by the pension system, is what "makes the problem a real problem."

With the oldest population in Europe and a rising number of retirees, Germany is already grappling with a creaking pension system. 

Reform, which Kooths defined as raising the retirement age, was required. He continued, "This is actually a problem that isn't handled today, but which should be addressed - the sooner the better. 

energy barriers
Germany's energy prices have fluctuated since Russia's full-scale invasion of Ukraine, similar to the rest of Europe. However, as the nation works to achieve its Energy Efficiency Strategy 2050, which calls for reducing its primary energy use by 2030, energy is also a longer-term challenge for the nation.

However, the transition to more environmentally friendly energy production is not always simple or inexpensive. For instance, in an effort to reduce the risk of nuclear accidents, Germany shut down its final three nuclear power facilities in April. However, many climate experts viewed this as a step in the wrong direction.

There are worries that German businesses may consider completely leaving the nation as a result of rising energy expenses.

Siegfried Russwurm, head of the German Industry Federation, told CNBC in June that while many companies with headquarters in Germany are succeeding on a worldwide scale, domestic operations are proving difficult for them.

The country of Germany is 'average'
Germany may take some time to shed its reputation as a "sick man" because there are so many elements that contribute to it.

"Germany... is no longer the engine of European growth; it is no longer at the top of the heap. Schmieding characterized it as average.

The sick man of Europe, according to Brzeski, is Germany, but he noted that "it is a couple of sicknesses that clearly have also hit other European economies." Therefore, this incident is not unique.

Germany is presumably only the most visible and exposed one, according to Brzeski.