Alert on the German economy. While industrial production in Germany showed a surprise decline of 4% on month in April, its biggest drop since 2009, four major German economic institutes have revised Thursday, October 9th sharply lower their common growth forecasts for Europe’s largest economy in 2014 and 2015 These now expect a rise in gross domestic product (GDP) 1 3 % this year and 1 2% next year, against respectively 1 , 9% and 2% in their predictions of April. Is this really serious? Christophe Blot analysis, economist at the OFCE.
These poor results are they a surprise to you?
A little bit. It must first be said that these figures are primarily the result of an extremely unfavorable geopolitical context. Economic sanctions against Russia are not a good deal for Germany since the Russians they buy fewer products. This weighs on German exports. And then there is of course the case of the euro area. Sluggish economic activity weighs on Germany. It is more exposed. The weakness of the French economy impact such a strong Germany because France is a very important trading partner. All this creates an atmosphere of considerable uncertainty. All confidence indicators in Germany are at their lowest.
This poor result they encrypt a deeper problem in the German economy?
Do not rush. We’ll see if this trend continues in the coming months. But even if Germany suffers, it will always be better than other countries in the eurozone. France has 0% growth over two quarters, Italy is in an even more difficult situation. The forecast for Germany of 1.3% growth in 2014 and about the same in 2015 This is better than France should be 0.8% this year. But these numbers are still significant one thing: Germany can not cope alone. It depends on its partners which had been somewhat forgotten. In the 2000s, Germany had benefited enormously from the expansion of emerging countries. She sold to India, China, Brazil. Today these countries are less successful economic situations so Germany pays a little. And as in most of Europe goes wrong …
What levers can Germany operate to remedy the situation?
It could already invest more in the public sector. Germany suffers from a lack especially in its public infrastructure. It should also try to revive private investment is sluggish. This is also the meaning of the message that the IMF wants Germany to be more extravagant in this field. There is also the question of a recovery plan within the euro zone. This is what the Commission advocate Juncker also François Hollande and Matteo Renzi. Holland and Renzi also say that we must make concessions on budget adjustments not to stifle growth. Angela Merkel is firmly opposed to this. But the German bad results can be an argument for the other states. They can say to Germany: “your performance is not good, so you must make concessions on austerity.” But again, nothing says Angela Merkel hear this speech. The level of unemployment is exceptionally low, for example in Germany (4.9%, Editor’s note). It is an argument that should not fail to emphasize to qualify these poor figures Chancellor.
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