An expat's commentary on current events in national security, foreign affairs, the media, culture, technology and assorted trivia.

Thursday, April 28, 2005


Heinrich, only a strong leader can fix the economic mess...

The Germany economy points out a glaring deficiency. What do we call it? The vocabulary fails as the mind struggles to update the former Wirtschaftswunder.

It is much deeper than a slowdown, longer than a slump. Stagnation doesn't cover it. Tailspin? Collapse? Malaise?

The Economist considers the situation and offers a no-lube reaming:

...IN THEORY, Germany should be booming by now. Sizzling global economic growth in 2004, and more of the same expected for 2005, has raised demand for its exports, a boon to its large manufacturing sector. The European Central Bank (ECB) has kept interest rates in the euro area at an easy 2% for 22 months, and looks set to keep doing so well into 2005. Fiscal policy is also expansionary: the government’s budget deficit has breached the Maastricht treaty’s 3%-of-GDP limit for three years running, and by all accounts will do so again this year. Yet for all this, for the past four years Germany has struggled to produce GDP growth of even 1% a year.

The future looks little better than the past. This week a consortium of German think-tanks released its semi-annual report, slashing its forecast for German growth this year from a lacklustre 1.5% to an almost pulseless 0.7%. More worryingly, the report argues that the German economy is not stuck in a particularly vicious cyclical slowdown. Rather, its structural problems, particularly the highly regulated labour market, have reduced trend growth (the average growth rate of the economy) to a meagre 1.1%, in contrast to roughly 2% for the rest of the euro area, and about 3% for the United States. Unless these trends reverse, Europe’s largest economy could eventually wind up as its economic backwater.

(Emphasis added.)

Hmmmm, maybe the German economy sucks because both corporate and personal income taxes are among the highest in Europe?

Or because the rules and regulations stifle entrepreneurship? ('You need 12 more forms and 7 more stamps. And pay these fees. And you can't open on Sunday.')

Or because the insane labour market policies make it extremely expensive to hire a new worker and impossible to fire him or her?

Or is because the leader of the governing party hates capitalism? And the vice-chancellor and foreign minister is a Green revolutionary Marxist? And citizens of Deutscheland think Karl Marx is one of the greatest Germans of all time?

Ohne Fleiss kein Preis.


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