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Economic confidence trick
There is a near consensus among observers that the uncertain political balance that seems bound to emerge, whatever coalition is eventually formed, will make it even more difficult for a government to grapple with structural rigidities in Germany's labour market and social infrastructure that, in the short run, would probably increase unemployment, already running at nearly 11%.
Whatever happened to the German economic miracle?
The answer is that the miracle is alive and well.
The problem is that it is confined to the export sector where Germany — its competitiveness up 8% since the start of monetary union — is still boosting its exports and retaining the formidable record of exporting more in absolute terms (and far more per capita) than any other nation, including the US and Japan. Whatever happens at the political level, German corporations will continue responding to the challenges of globalisation, as Siemens' announcement this week of 7,000 redundancies in Germany confirms.
As a result of all this — and a reluctance to buy anything, including imports — the country boasts a trade surplus of $200bn against a US deficit of $730bn.
In the medium term Germany must continue on the course it has already embarked on by freeing its labour markets, creating more incentives to work and financing the awesome consequences of demographic change on its pension system.
But its immediate problem is not lack of structural reform (as its export success confirms) but a chronic reluctance to spend. In July retail sales volume was down 3%.
as posted by sminkeypinkey
It might be a bit heavy on the economics for some but nevertheless it's nice to see some people capable of telling the other side to the story, huh?
If Germany's economy grows at 0.8% in 2005 and 1.2% next year, as the IMF predicts, then unemployment will almost certainly worsen even though industry will continue to do well in export markets. Yet the country needs a buoyant economy to enable structural reforms to be politically acceptable. Somehow the cycle of despondency must be broken before consumer confidence can be restored. The right place to begin is for the ECB to cut interest rates. But that is only a start.
Originally posted by sminkeypinkey: and that so much of Germany's problems still do relate to their reunification.
Originally posted by sminkeypinkey: and anyone who imagines that an export record like Germany's is not something almost any country would give their eye-teeth for is, imo opinion is fooling themselves.