“There cannot be a crisis next week. My schedule is already full” – Henry A Kissinger. His observation may already have been mentioned to Angela Merkel, who is battling with a refugee crisis, festering Eurozone regional challenges, and a growing malaise in German corporate life.
Yesterday’s lacklustre export numbers were badly timed, as over the last few years they have represented one of the few clear economic success sources for the country.
While the fading trade surplus largely reflects weakening growth levels in export markets, plus a slight firming in the trade-weighted euro, the trend is unlikely to reverse soon.
Fading German exports alone will just nudge down overall economic growth levels, but add in all the other factors – in particular the uncertainty over shorter-term Volkswagen production and demand levels – and the only reasonable conclusion is that Germany has an economic problem.
This would leave – in a delicious irony for most European political economy watchers – an increasingly embattled Merkel looking to Mario Draghi for more QE to help bail out German economic growth levels.
Scott Corfe, associate director at the Centre for Economics and Business Research, says No
Germany can no longer rely on exports to drive growth. The economies of its European neighbours are fragile. And China’s sharp slowdown is also holding back demand for Germany’s world-class products.
The recent Volkswagen emissions scandal has also dented the reputation of a country often seen as having a less corrupt corporate culture than the UK and the US. But we should avoid being overly cautious about Germany.
Consumer spending is picking up, supported by very low unemployment and a fall in global commodity prices. The country’s healthy fiscal position also gives its government room for manoeuvre, should things start to falter.
The recent influx of hundreds of thousands of refugees into the country is also going to boost the size of the workforce.
This alone could push up annual German GDP growth by as much as 0.6 per cent by 2020 – not to be sniffed at at a time when growth is hard to come by.