GERMANY LAST year experienced its most dramatic economic turnaround since the country’s unification in 1990, with tentative signs of a rebalancing away from export-led growth.
Gross domestic product expanded 3.6 per cent compared with the previous year – at least partly reversing a 4.7 per cent contraction in 2009, the federal statistical office in Wiesbaden reported yesterday.
The improvement in Europe’s largest economy, led by a rebound in investment spending after its worst recession since the second World War, provided welcome news for euro zone policymakers amid the region’s debt crisis – and strengthened Germans’ convictions that their focus on fiscal discipline is justified.
“Consolidation and growth work well together,” said deputy finance minister Steffen Kampeter.
A surge in imports and a modest pick-up in consumer spending, as well as the investment splurge, were cited by economists as evidence that domestic demand was increasingly driving growth – boosting the prospects that Germany’s revival will have a knock-on effect in the euro zone. “Imports are growing faster than exports, so we are reducing global imbalances,” Mr Kampeter said.
“Germany is playing the role that it should be playing,” said Michael Heise, chief economist at insurer Allianz. “We need a switch to internal forces, and that is taking place.”
Despite Berlin’s proclaimed fiscal prudence, however, the full effects of tightening measures implemented by Berlin have yet to be felt. Government spending rose 2.2 per cent last year, while the public sector deficit rose to 3.5 per cent of GDP. – (Copyright Financial Times Limited 2011)
