First, it observes that Germany has limited options to economic problems. The options are to either raise rates or allow inflation to grow. The fact that both options are problematic is why Germany has entered a recession this year:
In the run-up to the euro’s launch, German monetary policy was constrained by the need for most European countries to converge on a single euro-wide interest rate; and fiscal policy has been kept in check by the need to comply with the single-currency countries’ “growth and stability pact”. These constraints still bind: left to itself, Germany might respond to its latest bout of weakness with lower interest rates and a bigger budget deficit, but it no longer has these options.
Another point is regarding the orientation German markets. In particular, German economy is heavily dependent on China right now. While Chinese economy is doing well, there is now a push to decouple from it which will further hurt German economy:
A second spanner in the works was the economic crisis in emerging markets. Germany sends more of its GDP abroad than any other big European country (around 30%), with roughly a quarter of that going to emerging economies—and so has suffered more than most. The collapse of Asian markets hit basic producer goods especially hard; along with capital goods, these make up as much as four-fifths of Germany’s exports. Many German exports, such as chemicals and aluminium, were already suffering from global overcapacity before the crisis hit Thailand in mid-1997. The meltdown in Russia, formerly another big export market, has not helped either. It is striking how far Germany’s share of world exports has fallen since the early 1990s.
Another problem the article identifies is the high labour cost in Germany, and this is particularly relevant since Germany is competing with China in the manufacturing sector right now:
Mr Schmieding thinks that Germany’s high costs relative to what it produces help to explain why unemployment has risen from cycle to cycle since the 1960s. German workers may be productive, but not enough to justify costs that are running at 50% above levels in any other G7 country. Getting rid of workers is costly too. Severance pay is typically a month’s salary per year worked, plus generous retirement pay-offs for older workers. “The jobs market doesn’t really deserve to be called a market,” says one disgruntled company manager.
These are just a few examples that you evidently missed while reading the article.
To your last point, that’s par for the course in the whole EU, and it’s still putting out GDP performances nearing that of China. It feels especially coming from the Economist that it’s just capitalist whining that labour rights exist. It also had the same or at least very GDP growth that the US had for example.
Also one thing to consider is most German companies outsource manufacturing if not all the way to Asia, to Eastern Europe. German car manufacturers have more of a manufacturing presence in Poland and Hungary than in Germany, mostly because of the lower wages and laxer labour laws.
EU isn’t putting out GDP performance anywhere close to China. Especially, when you account for PPP. And German companies outsourcing manufacturing creates problems of its own as it moves jobs out of Germany.
sure
First, it observes that Germany has limited options to economic problems. The options are to either raise rates or allow inflation to grow. The fact that both options are problematic is why Germany has entered a recession this year:
Another point is regarding the orientation German markets. In particular, German economy is heavily dependent on China right now. While Chinese economy is doing well, there is now a push to decouple from it which will further hurt German economy:
Another problem the article identifies is the high labour cost in Germany, and this is particularly relevant since Germany is competing with China in the manufacturing sector right now:
These are just a few examples that you evidently missed while reading the article.
To your last point, that’s par for the course in the whole EU, and it’s still putting out GDP performances nearing that of China. It feels especially coming from the Economist that it’s just capitalist whining that labour rights exist. It also had the same or at least very GDP growth that the US had for example.
Also one thing to consider is most German companies outsource manufacturing if not all the way to Asia, to Eastern Europe. German car manufacturers have more of a manufacturing presence in Poland and Hungary than in Germany, mostly because of the lower wages and laxer labour laws.
EU isn’t putting out GDP performance anywhere close to China. Especially, when you account for PPP. And German companies outsourcing manufacturing creates problems of its own as it moves jobs out of Germany.