BERLIN — Germany aims to reach net-zero carbon emissions by 2045, despite being one of Europe's biggest polluters.

The powerhouse economy is also the third largest in the world after the US and China, however, Gross Domestic Profit shrank 0.3 percent in 2023.

According to the German government, real GDP is forecast to increase just 0.2 percent in 2024 and 1.2 percent in 2025.

Following a period of sluggish growth, the country fought to keep inflation down but can the Bundestag balance economic and climate policies?

Euronews reporter, Olivia Stroud, spoke with Germany's Vice-Chancellor and Federal Minister for Economic Affairs and Climate Protection, Robert Hack, to find out more.

Euronews: What is at stake for Germany in the European elections in June?

Habeck: For Germany, it is important that Europe commits to being European, that we grow together. The internal market is extremely important for the German economy. The internal energy market, which has been created in recent years, is a part of this. This is the German perspective as an economic and energy-providing country in Europe.

As a European, I must say, that it is extremely important that Europe becomes a political, noticeable entity. At the moment, Russia, the US and China are at odds on the world stage. It remains to be seen if Europe has a role to play there.

If we divide, if we do not act united, then major geopolitical decisions will be made over our heads. Since Europe is fundamentally a continent of liberal democracy, decisions will be made against or at least without consideration of our values.

Therefore, our economic, energy policy and climate policy interests, are all valid and important. Ultimately, this is about keeping Europe — as a union of liberal democracies — strong within the global community.

The future of the world will not be decided by the competition that exists between Germany and France, Denmark and the Netherlands, or Sweden and Finland. The future of the world will be decided in the competition between the USA, China, and Europe — and potentially India and Russia.

EU member states must recognise that their role is in Europe and affirm it. The European rules, the subsidies, regulations for economic support, approval procedures, foreign policies, and the ability — as difficult as it is for me to say — to create a European arms industry.

We must face this realization. If we understand Europe as a loose alliance of 27 states and do not equip it properly, saying that European integration must continue, then we will not be competitive globally.

Euronews: Germany is facing an economic crisis, and people's purchasing power has decreased. How do we get out of this?

Habeck: For Germany, it must be said that the country has been particularly hard hit for two reasons. We had this heavy dependence on Russian energy. Gas is over 50 percent, 55 percent, coal, but also oil, it comes from Russia.

And so it's no wonder that the German economy has been hit particularly hard. All of our contracts had to be renegotiated. It was different in the likes of Spain, the UK or Denmark. And Germany is an export-oriented country.

So we rely on the global market, and the global economy is weak. China also has economic problems – which subsequently affect Germany much more than other countries.

But we're fighting our way out of it. We have ensured energy security, we have now reduced energy prices, inflation is coming down, interest rates will soon fall again, and then investment will resume. And the global economy will pick up again. And then the country will have weathered this period of weakness.

Euronews: How can the labor shortage in Germany be addressed?

Habeck: Firstly, we need immigration. This is absolutely not a new insight. But for too long, conservative political parties have said, 'No, no, we don't need any of that.' Secondly, we need to better integrate those with potential — the people who are already here — into the labor market.

This particularly concerns young people who do not have vocational qualifications or lack professional qualifications. This has to do with the education system, with the further education system.

To put it in numbers, there are 2.6 million Germans between the ages of 20 and 35 here, who do not have vocational qualifications. And that's a political problem. It's not an individual problem where you say, 'You just have to try harder.' Too many people fall through the cracks because they may have dyslexia or problems with math. But still, they might be good craftsmen, talented in nursing.

The same goes for female workforce participation. It's worse in German-speaking countries — Switzerland, Austria, Germany — than the European average. Much worse than in Scandinavia. There is still a lack of childcare infrastructure so that one can balance family with work — also a political task.

And thirdly, I would say, in an aging society, we need to work longer. Those who want to work longer should be allowed to do so.

Euronews: Military spending in Europe has increased significantly. What are the consequences for the economy?

Habeck: Either we didn't see it or we didn't want to see what Putin was doing, how he steadily built up his armies there.

I don't like to spend money on armies and armaments. I can imagine it would be better for education, for research, for further education, and for climate protection and sustainability criteria. But we have to do it.

The time for not wanting to is over. Therefore, we have to increase military spending to be able to protect ourselves, for guaranteed European protection. We can’t rely on the Americans as the guarantors, but we have to become less dependent. Military spending has increased in the last two years because we have supported Ukraine so strongly.

In my opinion, however, it must be stabilized, also for... You almost have to say, the repair of the European and at least the German army in order to be able to do something.

Euronews: According to a report by the European Environment Agency, the EU is not prepared for climate change and heatwaves. What do you plan to do to change this?

Habeck: Now, first and foremost, the aim is to limit global warming as much as possible. It's solely about slowing down, containing the curve in a way that allows people to adapt, to withstand this significant change.

When you look at this from a biological and social perspective – relating to social cohesion and our communities, we must make our cities more resistant to heat and rain. We must make agriculture more sustainable.

We need water reservoirs in arid regions. We must review water management. We need coastal protection measures along the coasts and significant investments.

Euronews: More speed in the energy transition in Europe: What needs to be done? And what does that mean for industry and people?

Habeck: In the next term of the European Commission, there needs to be less bureaucracy in the expansion of renewables. We are making our lives unnecessarily difficult in some ways when you read The Renewable Energy Directive, I don't know if all of that needs to be so meticulously and extensively regulated.

So if we really want to make progress, we need to be more pragmatic and less bureaucratic. — Euronews