The robust health of the German economy is reflected in its regional and global rankings. The strongest and largest economy in Europe is also the fourth-largest in the world by nominal GDP. Germany is now the world’s third-largest exporter, after China and the US, with exports reaching the €1.1 trillion (around Dh4 trillion) mark in 2012. According to figures from the Organisation for Economic Co-operation and Development (OECD), the unemployment rate of 5.4 per cent is the lowest in Europe, while youth unemployment is half that of the US.
In September, Forbes magazine recorded that as of 2012, Germany ran a balance of payments surplus of $208 billion (Dh763.9 billion), the second highest in the world after China’s $214 billion. On a per capita basis, Germany’s surplus is more than 16 times that of China’s.
Strong statistics
“Another telling statistic is Germany’s net foreign assets. At $1.4 trillion recently, this ranks among the world’s largest. By comparison, America’s foreign assets are exceeded by its liabilities, and at last count, its net foreign liabilities were a shocking $4.27 trillion,” wrote Eamonn Fingleton, in an article that urged the US to learn economics from Germany.
Once described as the sick man of Europe, Germany now accounts for a fifth of the European Union’s (EU) output and a quarter of its exports. While Germany’s giants — from Volkswagen to SAP — are world renowned, thousands of smaller, lesser-known firms are global leaders in niche markets. The country’s budget is balanced, government debt is falling, and long-term bond yields are the lowest in Europe. Germany is the largest creditor country in the EU, and as chief paymaster it also has the greatest clout in determining the euro’s future.
As for its own economic future, the government’s autumnal forecast predicts a GDP growth of 0.5 per cent this year and 1.7 per cent for 2014, which is higher than its earlier estimate of 1.6 per cent.
Outgoing Economy Minister Philipp Roesler said in late October that economic momentum will speed up sharply next year. “The foundations of this growth are economic forces at home: the mood of German companies is good, they are again investing more in equipment and construction. Employment and income are growing significantly and bolstering private consumption,” he stated.
Think tanks predict
Germany’s leading economic think tanks — The Halle Institute for Economic Research (IWH-Halle), the Kiel Institute for the World Economy (IFW-Kiel), the Rheinland-Westfalen Institute for Economic Research (RWI-Essen) and the Ifo Institute at the University of Munich (IFO-München) — jointly predict a 0.4 per cent rise in GDP this year, and 1.8 per cent in 2014.
The German Institute for Economic Research (DIW-Berlin) expects 0.7 per cent growth for 2013 and 1.6 per cent for 2014, while the International Monetary Fund (IMF) recently said that growth in Europe’s top economy will amount to 0.5 per cent this year, and reach 1.5 per cent next year.
Percentage points apart, there is no denying the world thinks very highly of the Germany economy and expects that GDP growth will continue to improve. But it is a little known fact that the seeds of this success story date back to the 1880s when Otto von Bismarck implemented the world’s first welfare state and set Germany on the road to economic superpowerdom with his mercantilist approach to trade. The Iron Chancellor designed pension schemes and health care on a parity principle, where one half is paid by the employee, the other half by the employer. This principle is still at the heart of Germany’s social legislation, which has since expanded to include family policy, social welfare, and many other measures.
Germany’s foray into the 21st century was marked by soaring wages, high joblessness, a heavily burdened budget and excessive regulation, until the SPD (Social Democrats) government under Chancellor Gerhard Schröder introduced a set of sweeping tax, regulatory and labour reforms in 2003.
Chancellor Angela Merkel’s steady hand in a period of great economic uncertainty and instability has seen her popularity soar. She is credited for averting a complete euro crisis, and keeping the German economy humming through the worst of it.
Germany’s most-loved chancellor in decades is often called Mutti, an idealised mother figure who is stern, but fair and comforting. Her party Christian Democratic Union’s (CDU) landslide victory in September — marking Merkel’s third term as Chancellor — and its subsequent coalition with the SPD means it will have to consider tax hikes to finance new infrastructure projects. This tax take, although volatile in monthly swings, is another indicator of future economic development in Germany, pointing firmly upwards.
— Special to GN Focus
