By: Dr. Mike Campbell
Germany has the biggest economy within the European Union and is the world’s second largest exporting nation behind China. After a pretty horrible 2009, figures just released for 2010 by the German national statistics office put growth at a provisional 3.6%. This is in stark contrast to the 4.7% contraction seen a year earlier.
2009 was the worst year from an economic perspective for Germany since the end of the Third Reich and the defeat of Hitler at the end of World War II. By contrast, 2010 is the best performance since reunification of East and West Germany in 1990. The separation of Germany into communist east and capitalist west nations was a direct consequence of the war, of course.
German exports have rallied from a 14.3% decline in 2009 to a growth of 14.2% last year. Imports have also increased (reflecting higher demand) by 13%, contrasting with a contraction of 9% the year before. Another positive sign is that investment in new machinery and equipment was up by 9.4% which is a very healthy level compared to a decline of 22.6% seen in 2009.
An important feature of the German figures is that domestic demand has risen. Household spending rose by a modest 0.5% in 2010, but that compares favourably with a contraction of 0.2% experienced in the previous 12 months.
Even the nation’s debt problem will be the envy of its Eurozone partners. The target set under the convergence criteria for the single European currency was that the budget deficit should be no greater than 3% of a nation’s GDP. The new data indicates that Germany has missed this target, but only by 0.5%. The 2010 deficit of 3.5% represents the first time in five years that the German deficit has exceeded the target, but in the circumstances, it is a remarkable performance.