A shadow hangs over Europe. Donald Trump’s ascent to the White House exposed brewing in the continent’s economy and military skills. It was no apparent anywhere else than in Germany, an industrial power plant that has been experiencing two years of negative growth.
Now the ally of Germany, who lived in their shadow, remain before the questions of their own survival. This is most obviously in the neighborhood in the east: the Czech Republic.
As part of the giant Volkswagen Group, $ 348 billion lies, a quiet success story for the Czech Republic, which indicates that rising to war in the country, as well as its long -term risks.
The Czech Republic, also known as the Czech Republic, has built its economy after the Cold War as Germany after rethinking: with a focus on industry. Production as a share of GDP in the last 30 years has fluctuated above 20%, joining Germany to overcome the Western tendency of de -industrialization.
A third of the Czech exports go to Germany, and 20% of its imports from the closest neighbor.
Skoda, the largest company of the Czech Republic, owned by the largest company in Germany Volkswagen, is the best ties between the Czech Republic and Germany.
The force of the Squad
Skoda makes a significant piece of massive Volkswagen group, which also contains Audi, Seat, Porsche and the Volkswagen brand itself.
In 2023, the car manufacturer reached 26.5 billion euros, which increased by 26% by 2022, and is equivalent to almost 10% of the Czech economy.
If it was an independent company, Skoda entered the top -150 Fortune 500 Europe as one of the top 10 cars, and is definitely the largest Czech company on the list.
In recent years, the automaker has also not fallen, as his colleagues -ut produce under the Volkswagen umbrella. In the first nine months of 2024, Skoda increased the profit from operations by almost 35% compared to the same period in 2023, while the Volkswagen group generally faced a 10% decline.
Group’s profits in the first nine months of 2024 with 8.3% also put it among the most profitable brands in Volkswagen and much higher than the profitability of the collective group in 5.6%.
According to David Haurlant, the Czech chief economist in Ing, the “golden egg” in Volkswagen Group, “Golden Egg” Wealth.
Car sales in Europe are mainly focused on Europe. About nine out of 10 of his cars were taken to Europe in 2023, and the rest was traveling to the Asia-Pacific region. It seems that it protects the manufacturer from the sales falling out of Volkswagen, which created its dominance on the consumer consumer market in China, which has entered the opposite in recent years.
Indeed, after 2024, Skoda increased its supplies by 6.9%, compared to a 1.4% decrease in Volkswagen, reflecting nearly 10% decline in China last year.
This divergence with Volkswagen is more widely talking about the discrepancy between the Czech Republic and Germany.
The Czech Republic, together with Germany, fought until 2024, with GDP decreased by 0.3% after Russian energy sanctions.
However, the country is expected to jump faster than its partners to the West, in 2025 growth forecasts is 2.3%, almost triple predicted growth of Germany by 0.8%, according to international forecasts of the foreign exchange fund (IMF).
The Czech economy was more attractive to business that seek to expand their mark. For example, wages in the country make up about twice as much as in Germany, reducing entry costs.
Its wider population also seems more content.
“I would say that the Czech consumer is less depressed than the German consumer,” said Boto, head of the Allianz Trade, Head of the Economic Research Department, Wealth.
It is expected that domestic demand will become a large engine of Czech GDP this year, reflecting this higher consumer confidence.
But seemingly unwavering bonds between the Czech Republic and Germany continue to threaten the country’s economy.
Czech Republic obstacles
The production of the Czech Republic has moved to the castle with Germany since the last decline of the latter in 2022. Imps in both countries were on the territory of nearly three years, when manufacturers have struggled with higher energy costs and a fall in demand, which causes entrance consequences for manufacturers.
Ladislav Tail, a teacher in Prague University of Economics and Business, notes that there are about half a million jobs between the manufacturers and companies in the Czech car.
“So honestly, if anything, goes wrong … They don’t work Wealth.
Both countries fight the fall in investment, creating a barrier for future growth.
“It’s not really good for these economies, and it does not signal anything good in the coming years,” the rear said.
One of the main problems of Chezia in its heavy economy-climate goals. The country joined Italy last November, calling for a weakening EU climate rules This will prohibit the sale of vehicles with carbon by 2035.
Boata Allianz says that 2025 is the year of transition for cars and economies they occupy. On the one hand, they will need to increase the production of electrical and hybrid vehicles to comply with environmental rules. On the other hand, this means punching to much more competitive markets suffering from cheap Chinese competitors.
“It will also refer to a certain influence on the turnover of those suppliers, which are mainly related to German car manufacturers, not only in volume but also at the cost,” Bota says.
Havrlant Ing writes widely about the Czech economy. He says there are four stages of a structural crisis that the country must pass before politicians can enter.
“You have to admit that there is a problem. For -second, you have to admit that this is your problem. Third, you have to move yourself so you want to do something with it.
The Czech Republic is located somewhere in the third and four stages when it comes to its automotive sector, says Havrlant, while he believes that Germany was stuck at the zero point.
As a result, the Havrlant believes that the Czech economy is slowly resolved from Germany.
“Their order books were bad for so long that it has always been enough to wait for everything to improve, but it is not so,” said the Czech and German relations.
PoliticalAl Headwinds
Political history in the Czech Republic is also the same as in Germany and, more and more of Europe.
As in Germany, the elections are summoned in 2025, and in both countries there is a similar populist tone for the survey.
Between the Alternative Deutschland (AFD) in Germany, the national rally in France, the Italy in Italy and reforms in the UK, the largest economy in Europe were shocked by increasing the support of extreme political parties ready to upset the status quo.
Thus, it follows similarly to the jingaiistic patriots for Europe, the rebel sequiction party, which began to sweep the elections later in 2025.
The rear says the potential victory of the patriots for Europe will probably have a positive impact.
Instead, in the February elections of Germany, which are a greater risk of developing the Czech economy.
He worries that the growth of the influence of the right AFD can lead to Volkswagen to focus on reducing jobs outside Germany, and tens of thousands of Skoda staff potential targets.
The country hopes that Germany recognizes the importance of its “golden egg” and a deeper partnership, similar to what the Czech Republic serves more than its ally.
Editor’s note: The version of this article first appeared on Fortune.com on January 21, 2025.
Originally this story was presented on Fortune.com
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2025-04-03 05:00:00
Ryan Hogg
