WHILE ITS European neighbours are bracing themselves for only modest growth this year, or none at all, the oft-maligned German economic motor appears to be coming back to life with a purr that, depending on how you listen, is either one of satisfaction or self-righteousness.
After a year as the bad boy of Europe, with France and others accusing it of selfish economic planning, Angela Merkel’s Berlin government is now striking a defiant tone.
“This upswing didn’t happen by chance,” was the headline on a statement released by the federal government yesterday, praising its own “clever crisis management”.
“Modest, targeted” stimulus packages cushioned the drop in investment, it said.
The Handelsblatt business daily was in an even bolshier mood yesterday. With its front-page story – “Germany: mocked, cursed, admired” – it informed readers that Germany was the envy of the world.
“Germany is, compared to other countries, in an exceptional position . . . the German economy is making remarkable progress,” said Dr Joachim Scheide, chief economist of Kiel’s World Economic Institute (IFW).
After a 4 per cent shrinkage in 2009, his agency predicts economic growth of 2.1 per cent or more this year. The unemployment rate of 7.6 per cent is likely to drop later this year, the IFW forecasts, to 3.2 million as another 200,000 Germans find jobs.
The German DAX share index is already predicting that 2010 profits will be up 65 per cent on 2009.
After losses last year, BMW reported a six-fold jump in profits this week and a 9.6 per cent jump in earnings before interest and tax in the second quarter, compared to a loss last year. It predicts retail volumes will be up 10 per cent this year, with pretax profits growing faster than forecast.
Over in Ludwigshafen, chemical giant BASF, with its broad product palette, from pesticide and polymers to animal feed, is an especially useful economic barometer and all signs are good.
Turnover in the second quarter was up a third on the same period last year; sales volume was up 14 per cent, while prices have posted an unusually high rise of 9 per cent. Amid all the figures, perhaps the best proof that Germany’s economy is back to black, enough to convince even the hardcore pessimists, was this week’s reappearance of Dieter Hundt.
Mr Hundt, head of the German Employers’ Federation, rolled out his standard warning to unions in serial interviews not to “burden or damage the economic upswing” with unrealistic wage demands.
But therein lies the rub: some 82 per cent of Germans quizzed by Stern magazine say the economic upswing has, so far, passed them by. After a decade of wage restraint, some 71 per cent say they back a union pay demand of at least 3 per cent in upcoming talks.
Unions and the political opposition parties say another modest pay round will keep the brake on already low German consumer spending. That in turn will revive the core complaint of Berlin’s European neighbours that, with austerity programmes and a continued lack of interest in stimulating consumer spending, no one but Germany will benefit from Germany getting its groove back.
