Germany makes an economic comeback!

Interesting article yesterday in The Sunday Times.

http://www.timesonline.co.uk/printFriendly...1714648,00.html


The gist of the article is that the UK boom has been fuelled by borrowing (both consumer and government) and that has come to the end of the road.

German consumers as we know have been savers and non-consumers mainly due to "fear". Theory is once the confidence comes back we will have a mini-boom here, and that this has already started.

Personally I agree with this. I think the UK is indeed looking down the wrong end of the barrel (debt levels are unreal), and that Germany is fantastically wealthy so once they relax a little it will be a great economy.

Well I hope you are right about Germany. Another positive sign is the German stock market, it has picked up rather nicely in the last couple of months for no apparent reason. Also, a change in Government this Fall will contribute to ending the misery.

Agreed JE. Read an article in the FT about 3 months ago that stated that the UK population's credit card debt is higher than all the other member states of the EU COMBINED!!! Put that along with much lower manufacturing capacity and the housing market bubble and it starts to look scary. I notice the Old Lady of Threadneedle Street is poised to cut interest rates again. Germany announced the jobless rate falling for the fourth straight month in July. It's not all rosy and plain sailing, but it's a start. Mind you, it'll probably go tits up if Merkel gets in.

There also has been an increase in the number of available jobs, especially in the technology sector.

Interesting article although it was peppered with "ifs, shoulds and coulds". I agree that Britains average household debt is too high (average on credit cards last year when I left the UK was £13,500) which is ridiculous. Costs over here are an issue though as is tax, especially when buying a home which makes it difficult for people to be flexible and move where the work is.

I heard that isf this Ferkel gets into power she will increase the Probezeit to 3 years instead of 6 months as it is now. Bollocks to me finding a proper new jiob then.

I'm still not convinced, although there average credit card is higher in the UK, that because in the UK we can actually use credit cards (unlike here in Germany) and most tend to use the credit cards, instead of cash and pay off later. I read a BBC web site about three months that tried to put all this into perspective, and basically most of the debt is not really debt, its just using the card !

Then there is the unemployment, while Germany has started to grow, Britain's growth as I understood is still better, and depending on how the interest rates go in Britain in August, this could then keep the growth.

Final rant, before people jump off the deep end and say Germany is suddenly smelling of roses and Britains on an ever declining slip, look at the massaged and unmassaged unemployment figures (come on both countries do it !), and Britain still has more growth options compared to most Germans.

Edit @ Oli - all the European markets seem to have picked up quite nicely, so its not just Germany ! But I do not think you can really see too much from this, when you compare the last 2 years, there up and down faster than a prostitudes pair of knickers !

The UK might have problems but Germany still has serious structural problems in the economy that have not been dealt with.

Companies are starting to hire again but its still patchy and in TK sector seems mainly to be driven by outsourcing and upgrade work associated with UMTS/3G, it is still extremely shaky.

Firstly there is the east!!!. Go to Berlin for a few days, for any of the Brits on the forum the feeling of having walked back into the UK of early 1980s is overwhelming. Great place, great feeling of creativity etc, but economically on its arse.

Cost of labour here is still too high, why not go to Poland,Czech or Slovakia or anywhere else in the east you can get people who speak german and increasingly english and are highly educated and dirt cheap.

Pensions timebomb !!!

Etc etc

Germany has a better infrastructure and better productivity and the cost of labour is stable. I know of serveral cases of people moving work east but then finding they weren't getting the quality or reliability and thyt the costs of labour were increasing.

In some cases, work has come BACK to Germany.

A lot of the problems with the german economy have been becuase people have been talking it down ever since the election of the first Schröder government.

Consumer confidence needs a boost to get the economy moving. Not attacks on working conditions or an extra 2% Merkelsteuer on everything we buy.

as pepper says, so have most stock markets. The economist wrote similar stuff about Germany's relative labour prices sinking. Heading in the right direction although still some way to go.

One thing is for sure.. This time, there are several think tanks that are finally willing to predict a financial comeback for Deutschland AG. I have been reading in the news for the past few months about the slowly, but steadily improving economic conditions in Germany. As the economic recovery picks up steam, and consumer confidence gets back to normal (it already appears to be heading in that direction), I agree that Germany is looking at another boom time on the horizon.

The German economy has been in a steady down turn for some years now, and with the high taxation (remember that VAT is also about to be raised) and the difficult labour laws companies are simply not hiring like they used to, unless the labour laws change, and the taxes improve, Germany will stay in a steady decline for a long time. As someone employed, in a safe job (over 8 years in the company) I'm fine, but everything is changing.

Even Hospitals are laying off staff now.

Any boom with take a long time to come. There are too many cracks ! boom is when there is low unemployment, the ecomomy is growing, I mean by more than point something percent, and people are spending.

The stock market has picked up because investors are predicting regime change in September...

I doubt that Germany will experience any kind or rapid economic growth in the future. Any upturn in the economy will be moderate, the mainstay of the German economy, heavy industry, is losing ground to competition in Asia as well as developing Eastern European countries. You will see an economic "boom" similar in style but smaller in magnitude to what occured in the US during the 1990's. The British and American economies grew mostly because of a development in services combined with increased consumption and borrowing. You also have to consider the fact that the population in Germany is aging and in a state of decline. Germany's population is to decrease to nearly 65 million from today's 82 million in twenty years. The US and Australia are the only two industrialized nations that will see significant population growth, the US will balloon to 400 million + over the next two decades, Australia could potentially grow from 20 million people today to almost 30-40 million people in two decades.

Uh, where do you get your figures from? The German Federal Statistics Office estimates a population drop to around 75 million over the next 45 years. This will be preceeded by an increase in population in the next, er, 20 years.

article

@STB
... off the top of his head?

...management decision?

MarcusBlair

Your numbers for the US and Australia don't seem to make sense either: If Australia's population were to increase by 50-100 % in just two decades, that would equal annual growth rates of something like 2-4 %. For the US, growing from 290 m to 400 m in 20 years would imply annual growth rates in excess of 1.5 %. Those growth rates are way more than what either country has been experiencing.

@Jeeves
It gives a whole new meaning to the term "downsizing"...

Regardless, America will be well ahead of Europe, it already is even with Bush and the weak US Dollar. Most economists aren't painting a bright future for Germany's status as the biggest economy in Europe, the UK will eventually pass Germany as Europe's largest economy. Despite Germany's status as the "largest European" economy, this does not seem to say much, Germany's standard of living is considerably lower than that of the US. Germany is not even in the top ten on the UN quality of life index.

The top 10 is hardly indicative. The top 20-30 all have around the same quality of life. It's based on life expectancy, adult literacy rate and GDP per capita. I'd choose Germany over Norway (the number 1) anyways.

Jeremy, from what I understand, Merkel isn't going to increase Probezeit to 3 years. She is likely to decrease the necessary period for laying someone off however. Probably 4 weeks.

The tech sector back in the UK is certainly improving much more than here. I'm giving it 'till next year to see if things pick up here and if they don't then it's possibly back to blighty. The cost of living is pretty frightning though the times I've been back recently and the amount of borrowing being done off the back of the ridiculous house price situation is insane.

@MB: You'd better stay in America then.

You did not understand me, we Americans rule the world, and we effectively own Germany. Remember the US troops in German bases??? I was once among them.

From what I observe I would say America rules the world in the same way GB used to rule the world. That means the US has the privilege of being the world policeman. This entails sending their young men to die in Iraq, Vietnam, Korea, etc in the name of the western ideal of freedom. Cynics might say is simply the freedom for Macdonalds, Coca Cola, Boeing etc to do business around the world.

Of course the British are not out of the mire themselves. We still set great store by our political sway. (The assumed, but actually barely existant, influence on the US) This meaning a British soldier gets his chance to bleed for Queen & Country (and the Amercian dream) as well.

The US balance of payments is in excess of -$55Bn. Look at the history of the UK. It doesn't matter how large the war machine is in a developed nation the finances need to add up. I'll put my money on China as the next ruler of the world, and probably an eachway bet on India as a hedge. I don't think the US owns Germany mate. Maybe it has it on a lease, and leases don't last forever.

Like it or not a lot of people in Europe, Australia, Canada, and Japan despite a lower opinion of the US, still favorably view the USA as a protector of their societies. At least for the next several decades, I see the US bearing most of the responsibility for keeping these countries safe and secure. The US presence underlies much of Europe's current peace and stability. Before America's presence, Europe was constantly mired in quarrels and wars. In the years since 9-11, there has been a lot of infighting and quarrels about what Europe should do in the war on terrorism, and it has exposed that "United" Europe is still quite divided.

Right own up what idiot in America was prepared to let Marcus loose with a uniform and a gun
Oh yeah and Marcus if Americans effectively "own" Germany funny how you still need visas to live and work here

You mean the ones being pulled out because you need more troops in Iraq? The US can't even subdue one little country, sunshine, let alone the whole world.

Wow! I like strong and dominant men. Can I be your intern please! You will be very happy with me!

I suggest you have a look here Guenter (if you are as your profile suggests German)

German physicians - Bespectacled Nazi doctors

Before selling your soul to Marcus

All over the news this morning...

Germany's Trade Surplus Unexepectedly Rises!

Based upon the positive news coming out of Germany in recent months, it would seem that Germany is finally on the road to economic recovery.

that implies that domestic consumption has declined severly and so the consumer confidence...hence isnt necessarily any good news

Although in itself the largest European market, Germany's economy is VERY export lead so that's not necessarily true Rahul. Though I will grant you that getting domestic consumer confidence going is the way for the german economy to improve. A 2% Merkelsteuer ain't the way!

don't agree MT. I think consumption taxes like MwSt are far better for the economy than direct taxes. As long as the 2% rise is in conjunction with a reduction of direct taxes, the economy should benefit from it.

Even IF a 2% Merkelsteuer was "balanced" by reduxtions in direct taxation it is a burden that would still fall most heavily on those with lower incomes who pay more as a proportion of income in indirect taxation.

CDU taxing the poor to give breaks to the rich, now WHAT a surprise!

Bloody politics!

actually MT that is nonsense. People with higher disposable incomes purchase more goods and services at the higher MwSt rate than people on low incomes.

Food, for example, is split between "Grundnahrungsmittel" like bread and milk, which have only 7% MwSt and luxury items which currently have 16%

other examples of lower rates are:

mains water
transport
books, newspapers and magazines
tickets for cinemas, theatres and other cultural events
agricultural products
medicines

and so on.

The more people earn, the more they consume. Since people can only consume so many "basics", they tend to purchase luxury goods that attract the higher rate of VAT.

Your theory is therefore quite incorrect, MT. Indirect taxes structured like this mean higher earners pay MORE taxes and lower earners less.

As a proportion of their income!

I think a lot of TTers need to compare their incomes with the average and look at the cost of living, particuarly to raise a family.

Anyone who thinks Merkel's got any nice policies for low paid people in employment is in for a nasty shock.

Are you reading the same news article as I am? How do you arrive at your conclusions? I quote:

The fact that both exports (on increased foreign demand) and imports rose seem to indicate the opposite.. ie. that domestic consumption has increased.

@deutschewelle.de


Now what can one say about it ..though I believe that imports have fallen.

Here's the original raw data from Statistics Germany:

http://www.stabu.de/d_home.htm

Apparently, imports were very high in May, so it's not that unusual for them to fall in the following month. Monthly economic data is always highly volatile.

Ooops, just noticed that the link only gets you to the homepage of Statistics Germany, there are no sub-pages you can link to.

If you want to check, you need to click

"Aussenhandel" (on the left)

and then

"Monatsdaten - Einfuhr nach ausgewaehlten Jahresgruppen"

the Economist from last week thinks German shares and house prices are undervalued and that Germany could be in the process of making a comeback

Well, despite a good start this year, it now turns out that German economy remains in stagnancy.