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19 August 2013

Population decline is real and happening in Europe right now

Until recently, German house prices were remarkably flat. In fact, it wasn’t until the collapse of property bubbles elsewhere in Europe that investors began to look to the German market. There are various explanations as to why the Germans should be so out of step on this matter. These range from a comparatively low rate of home ownership to the accommodating nature of local planning policies.

There’s another possible cause – in Britain there aren’t enough houses for people to live in, but in many parts of Germany there aren’t enough people to live in the houses. Reporting for the New York Times, Suzanne Daley and Nicholas Kulish describe the impact of depopulation in the town of Sonneberg: 

  • “At first glance, this town in central Germany, with rows of large houses built when it was a thriving center of toy manufacturing, looks tidy and prosperous. But Heiko Voigt, the deputy mayor here, can point out dozens of vacant homes that he doubts will ever be sold.
  • “The reality is that the German population is shrinking and towns like this one are working hard to hide the emptiness. Mr. Voigt has already supervised the demolition of 60 houses and 12 apartment blocs, strategically injecting grassy patches into once-dense complexes.”

This isn’t an isolated example. The cause is a national decline in fertility rates, a problem which Germany shares with several other European countries:

  • “There is perhaps nowhere better than the German countryside to see the dawning impact of Europe’s plunge in fertility rates over the decades, a problem that has frightening implications for the economy and the psyche of the Continent. In some areas, there are now abundant overgrown yards, boarded-up windows and concerns about sewage systems too empty to work properly. The work force is rapidly graying, and assembly lines are being redesigned to minimize bending and lifting.”

For once, Germany has failed to set an example for the rest of Europe to follow:

  • “Germany… an island of prosperity, is spending heavily to find ways out of the doom-and-gloom predictions, and it would seem ideally placed to show the Continent the way. So far, though, even while spending $265 billion a year on family subsidies, Germany has proved only how hard it can be.”

Daley and Kulish identify cultural factors as a big part of the problem. Germany is a country that has “long glorified stay-at-home mothers,” they say. What they don’t mention are the inflexibilities of the German labour market. Workers enjoy strong employment protections, but that can make it very hard for women to get back into the jobs market after having left it to have children.

It is a similar story in southern European countries like Spain and Italy – only here there is a big additional threat to fertility rates:

  • “Several recent studies show that historically high unemployment rates — in excess of 50 percent among youths — in countries like Greece, Italy and Spain are further discouraging young people from having children. According to the European Union, the total number of live births in 31 European countries fell by 3.5 percent, to 5.4 million from 5.6 million, between 2008 and 2011. In 1960 about 7.5 million children were born in 27 European countries.”

This doesn’t quite add up to the “demographic death spiral” that some commentators foresee. But to a large extent demography really is destiny. Europe’s future can only be diminished by the shrinking size of each new generation.


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