Germany Posts Q1 Growth

With the Greek drama playing out on centre-stage right now as last-ditch efforts are made to avert the need for a second general election which could give a mandate to the left to tear up the austerity package that secured Greece its second EU/IMF loan, it is timely to remember that the Greek economy is not in the top tier of EU economies. Germany, on the other hand, is the most important economy, by size, within the EU and the smaller Eurozone group.

Germany ended 2011 with an economic contraction of 0.2%; its first period of economic contraction since 2009. Amongst other things, the on-going sovereign debt crisis, generally weak economic data and poor prospects for employment both in Europe and within the global economy, had led to fears that 2012 would be a very difficult year. So far, economic indicators for 2012 have been mixed. The band aid that had been placed on the European sovereign debt crisis with Greece’s second bailout has been ripped off by the inconclusive Greek election and the success of parties strongly opposed to austerity measures. It comes as quite a relief, then, to learn that the German economy has bounced back to growth in Q1 2012.

The German economy has grown by 0.5% during the quarter – if the data is compared against the same quarter from 2011, the growth is 1.7% (year-on-year). According to the German statistical agency, Destatis, the expansion was due to a combination of better export performance and increased domestic demand. German exports have been made more competitive by the woes of the Euro. The Euro has declined by 11% against the Yen from this time in 2011 and by 9.9 and 8.9% against the US Dollar and Sterling respectively.