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Cenk Alican
Cenk Alican |
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Tuesday, 31 August 2010
According to recently-released data by Eurostat, a Luxemburg-based EU statistics institution, GDP increased by 1.0 percent in both the Euro area and the EU-27 during the second quarter of 2010. It has been Germany`s best quarterly performance of 2.2 percent since reunification (1989/90) that compensated the slow growth in Spain (0.2 percent) and Italy (0.4 percent).
In early-August the Federal Government under the leadership of Angela Merkel and its junior partner, the business-friendly Free Democratic Party, released a statement that praised the chancellor`s clever crisis management, citing Fred Irwin, president of the American Chamber of Commerce in Germany. The remarkable progress of German economy in the immediate aftermath of the global downturn the impacts of the economic shrinking have not come to an end yet will blow a promising wind over labor markets and create new jobs. 86 percent of middle-size enterprises are eager to employ more people in the second half of this year.
There used to be times when US politicians and industrial bigwigs made fun of Old Europe, a term that was first used by U.S. Secretary of Defense Donald Rumsfeld in 2003 to refer to European countries that did not support the 2003 invasion of Iraq. Transatlantic friends were mocking Europe`s, especially Germany`s, high taxes, jungle-like and swollen labor and industrial bureaucracy and enormous welfare-spending, that brings about high insurance expenses and salary cost for employers. But Germany still is the main economic engine behind the EU and upswings do not happen by chance.
As Greece`s misguided economy and almost-bankrupt shook the euro zone`s confidence, some market prophets even started predicting the end of the EU. Financial aid to the Hellenic government came at a time when domestic unemployment had reached climax and taxpayers ripped out Merkel with hate-filled oaths. In order not to risk the European project Germany swallowed the bitter pill, to some extend being forced due to mutual economic dependence between Germany and the EU. But, as a result of investor concern about the debt crisis in Greece and Spain and value-loosing euro, German products are less costly abroad now, thus reviving export sectors. With a mid-term future perspective, Merkel`s decision to provide support to Greece was not as irrational as one might think and by the end a very sophisticated step towards economic growth. The oft-maligned economic strategy turns out to be an elaborate tactic.
Throughout the entire period of the global crisis Germany was able to keep its manufacturing sector in the country and not to shift production to abroad. The state subsidized workers who agreed to work fewer hours, thus minimizing layoffs. But now, with an economy crawling back towards its old prosperity, labor unions demand higher wages after a period of restraint. Strategists in the cabinet must find ways to satisfy workers and show that the upswing has not passed them by. Reforms of the pension system and cuts in welfare spending helped revitalizing domestic economy.
The strong growth will encourage Merkel to trim spending and reduce the budget deficit. The German consumer is still tepid, even in good times, and leaders of other countries have complained that Germany has not done more to convert its export success into demand for products and services elsewhere in Europe.
As the euro loses value and thanks to high international competitiveness, Germany`s export-dependent companies are benefiting at most from the rebound in world trade. Germany`s continental dominance is unquestionable and its greater say in Europe`s fiscal and economic affairs will remain in foreseeable future.
