Yes, ‘tis the season to be jolly. An old man has just finished emptying his sack in living rooms across the land, delivering his presents to kids down their chimneys because Mrs. Claus told him he’d never get in the back door… Wait, can we start again? Indeed, that is precisely what the EU will be asking throughout 2015 unless Germany does more to stimulate domestic consumption and investment.
In the third quarter the euro zone grew by just 0.6% at an annualised rate. Who is to blame? Das ist the question. You’d be forgiven for throwing the plates of responsibility at Greece, but that would be an uncalled for waste of dinnerware. Yes, traditionally allied with meaty sausages and gigantic jugs of beer, the European powerhouse that is Germany has been struggling with a stagnant economy as of late. Uh oh. Surprising, I know, seeing as the Germans have been raking it in for the past month at Winter Wonderland!
Germany’s GDP – (what’s GDP? ‘Gross Domestic Product’ – the monetary value of all the finished goods and services produced within a country’s borders in a specific time period) – grew by just 0.1% in the third quarter, after contracting by the same amount in the previous three months. Considering the penalty kings have been recognised in recent years as the largest national economy in Europe, the fourth-largest by nominal GDP in the world, and championing one of the lowest European unemployment rates, the ramifications of a torpid German economy are considerably worrying for the rest of the EU.
Angela Merkel, the German Chancellor, has been receiving a fair bit of foreign flack for the slump, and is being urged to stimulate domestic consumption. Consumption of goods in general, not just sausages. This would assist countries like France and Italy as they undergo tough structural reforms. Higher imports would also reduce Germany’s current-account surplus, the largest in the world and a cause of imbalances within Europe and beyond. Stimulating demand would push up prices, which could save the euro zone from tipping into the wurst (pun intended) type of –ation, namely deflation.
Indeed, the ECB (European Central Bank) has been buying covered bonds and asset-backed securities to try to revive the eurozone economy and keep deflation at bay. However, the crux of the matter is simply that Germans don’t like spending unnecessary money. Following the Second World War, times were hard. Very hard. Like Phil Mitchell hard. Germans had to be very economical and efficient with their money, and this trait has been passed down through subsequent generations.
So, is it just the native Germans being tight which is causing tension? Nein. At least that is the opinion of the President of the Ifo Institute for Economic Research, Hans-Werner Sinn, who has challenged a study claiming immigrants are bringing money to Germany. The economist said Germany is a “magnet for unqualified immigrants.” In a new calculation, Ifo Institute claims that “every migrant costs 1,800 euros more per year than they contribute.” These assertions alarmingly coincide with the growing anti-islam PEDIGA movement, who have staged several protest rallies across Germany over the last couple months. Such protests seemingly discriminated against people with different skin colour or religion. This all feels uncomfortably familiar. Merkel recently stressed that Germany wanted “security in Europe together with Russia, not against Russia.” Let’s hope so, otherwise there could be some t-rouble in the coming decade.
By Garry Caprani