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Right-wing extremism is hitting the German economy

Supporters of Pegida hold flags during a demonstration at Konigsufer Square in Dresden, Germany on February 6, 2016.
Mehmet Kaman | Anadolu Agency | Getty Images
Supporters of Pegida hold flags during a demonstration at Konigsufer Square in Dresden, Germany on February 6, 2016.

A rise in right-wing extremism is posing a serious threat to the economy in East Germany, according to a government report.

One such industry affected is tourism. The Dresden marketing organization told CNBC via telephone that domestic visitor numbers, based on overnight stays in the city, were down 3.7 percent year on year in the period of January to July 2016.

This is a significant amount when you take into consideration that domestic holidaymakers account for 80 percent of the total tourism in Germany, according to the German National Tourist Board (GNTB).

The visitor drop in Dresden was partly blamed on xenophobic statements made during Pegida demonstrations. Pegida is a far right, anti-immigration group originating in Dresden.

Slightly offsetting the domestic fall, international tourist figures in Dresden were up 4.4 percent in the same period.

Iris Gleicke, the German official behind the governmental report published earlier this week, said that: "Right-wing extremism in all its forms poses a very serious threat for the social and economic development of the 'new' states." The report is published annually and assesses Germany's reunification process.

German chancellor Angela Merkel arrives to address journalists following a meeting with German parliamentary groups and ministers to discuss the so-called Brexit referendum at the Chancellery on June 24, 2016 in Berlin.
John MacDougall | AFP | Getty Images
German chancellor Angela Merkel arrives to address journalists following a meeting with German parliamentary groups and ministers to discuss the so-called Brexit referendum at the Chancellery on June 24, 2016 in Berlin.

For GNTB CEO Petra Hedorfer, the news was not a surprise. She added that: "Across Germany too we are currently observing a slowdown in the growth of inbound tourism, which had previously been booming."

Hedorfer acknowledged that the phenomenon's effects could be more wide ranging: "Right-wing extremism, xenophobia and terrorist attacks are damaging Germany's image abroad and could have an impact on the volume of inbound travel to the country that would then affect its tourism economy."

According to a report by domestic intelligence agency BfV, the number of attacks per million citizens inspired by right-wing sentiments in the eastern state of Mecklenburg-Vorpommern was five times higher than western German states, falling at 58.7. Here, the far right Alternative für Deutschland party saw election success earlier this month. Two weeks ago, residents clashed with asylum seekers in the East German town of Bautzen.

Several analysts CNBC spoke to pointed out that rising tensions between immigrants and far right groups – and the potential impact on tourism – was not just occurring in Germany, but across Europe too.

But, Matthew Henman, head of IHS Jane's Terrorism and Insurgency Centre, added that: "There is a much more pervasive fear of Islamist militancy than right-wing extremism. Caucasian tourists are far less likely to be targeted by right-wing extremists. The specific intent of Islamist militants to target Western civilians in general means that there is a greater risk from this angle."

Hedorfer suggested that: "International travelers have a growing awareness of social responsibility and of the political and social trends that are playing out in the destinations that they visit."

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