Thursday, January 13, 2011

Germany Puts Finishing Touches on Impressive 2010

The German model has held up very well during the financial crisis and ensuing recovery period.  While no longer the world's largest merchandise exporter   [May 21, 2008: Who is the World's Largest Merchandise Exporter? Not China. Or the US], this financially conservative nation has balanced the needs/demands of the worker v corporation v government better than most other systems.  It has not come without sacrifice as wages have stagnated in the country to keep corporations competitive, but in return the corporations and government worked together to avoid the 'slash and burn' tactics of U.S. multinationals during the downturn.  [Jun 16, 2009: As Euro Zone Unemployment Spikes; Job Saving Measures Emerge - Completely UnAmerican]   Rather than a legacy of hordes of long term unemployed losing their skill set and increasingly despondent (or bitter towards government)... and almost completely dependent on massive government transfer payments to consume, Germany was able to spend far less of GDP in supports and has come out the other side with demonstrably lower unemployment.  And a much sturdier fiscal position, with deficits headed back to a manageable 3% of GDP.  Of course when I rhetorically asked last fall if America can learn anything from this model, there was blowback since of course I am a socialist for even offering that this country could learn one thing from any other ;) [Oct 1, 2010:  German Unemployment Rate Down to 7.2% after Peaking at 8.7%; Can We Learn Anything?]  Oh well no worries - our economic model of blowing serial bubbles and massive deficit spending to keep the gerbil running, is working like a charm.  Why change what is "working"?

Via AP:
  • The German economy grew last year by a powerful 3.6 percent, its fastest pace since reunification two decades ago, as a rebound in exports was accompanied by strengthening domestic demand, official data showed Wednesday.  The preliminary growth figure for Europe's biggest economy contrasted with a painful contraction of 4.7 percent in 2009, which was by far its worst showing since World War II.
  • "We grew twice as fast as the European Union average," said Economy Minister Rainer Bruederle, who had forecast growth of 3.4 percent. The figures show that "people are rightly looking optimistically into the future," he added.
  • A key trigger for the strong recovery was powerful growth in exports into a recovering world economy -- a 14.2 percent gain last year reversed a 14.3 percent decline in 2009. Germany is the world's second-biggest exporter after China.
  • However, "what was striking in 2010 was the fact that economic growth was not only based on foreign trade, but also on domestic demand," the Federal Statistical Office said in a statement.  Household spending rose 0.5 percent, recovering from 2009's 0.2 percent decline.  Imports rose 13 percent, more than making up a 9.4 percent drop the previous year.
  • Germany has been helped by tame unemployment, which stood at 7.2 percent in December. It was kept in check at the height of the financial crisis as a government-subsidized short-time work plan allowed employers to reduce production without cutting employees, and has fallen over recent months.
  • The DIW economic institute said German companies' specialization in so-called investment goods that draw strong foreign demand helped the country to bounce back, and firms were able to adjust quickly to the upswing because they had kept well-qualified staff.
  • Wednesday's data showed that Germany's budget deficit came in at 3.5 percent of gross domestic product last year -- exceeding the 3 percent limit laid down by European Union rules for the first time in five years.  In 2009, Berlin just managed to comply, with a deficit of 3 percent.
  • "Just remember that less than a year ago, the German government still expected a 2010 deficit of 5 1/2 percent of GDP," Brzeski said, adding that the outcome is "a good illustration of the importance of economic growth for public finances."  Austerity measures being implemented this year and further economic growth should push the deficit back below 3 percent this year, he said.

[Aug 26, 2009: China Poised to Tie Germany for World's Lead in Merchandise Exports]
[Jan 6, 2010: China Passes Germany as World's Largest Exporter]

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