More on Germany Post author By Philip Lane Post date September 1, 2014 The economic challenges facing Germany are reported in this FT Analysis article. Categories In Uncategorized 9 Comments on More on Germany ← Ireland → Deflation Once Again 9 replies on “More on Germany” Schaeuble is not for turning! http://www.bloomberg.com/news/2014-08-28/schaeuble-sees-draghi-s-instruments-for-growth-exhausted.html The question that seems not to have been put to him is how he can view the level of investment in Germany as satisfactory when all the data – seemingly – indicate the opposite to be the case. DOCM, https://www.cia.gov/library/publications/the-world-factbook/fields/2259.html EU contains both problem countries and catch-up countries population growth .. /fields/2002.html real output from OECD Annex Table 1 investment pop growth output 2013/2005 2014 2006 2014 2006 absolute per capita EU 17.9% 19.6% 0.22% 0.15% 1.13% -0.35% FR 18.7% 19.4% 0.45% 0.35% 2.81% -0.42% DE 17.5% 17.1% -0.18% -0.02% 7.74% 8.61% UK 13.8% 16.3% 0.54% 0.28% 1.60% -1.67% US 15.3% 16.8% 0.77% 0.91% 7.64% 0.67% gosh, I am shocked, truly shocked, Germany is leading the 2nd best, the US only by 8% in output increase “Germany must” … “do something” immediately, …. whatever the anglo-americans say , “just do it” ROFL @ francis What is your point? Investment in fixed capital is the issue. The CIA figures, by way of example, show 17.5% for Germany versus 20.8% for Austria! (Australia 27.4%!) France 18.7%! Ireland 10% (a major and continuing policy error!) Italy 17.6%! Japan 21.6%! UK 13.8% (?)! US 15.35 (?)! The poor performance of Germany in terms of maintaining demand and investment in the domestic economy could, perhaps, continue but not in circumstances where Germany is running an enormous balance of payments surplus within a single currency area and the whole of Europe – and not just the EZ – is threatened with deflation. The nostrums of Schaeuble have zero credibility at this stage. An example of his wanting all the advantages of the single market and the single currency without putting up with any of the disadvantages can be found even in his most recent opus (with Lamers). “EU-level action is also required to deal effectively with demographic challenges and the concomitant shortage of skilled labour. If we want to remain strong and competitive, we need enough qualified workers. The EU’s fundamental freedoms will help us to achieve this aim. We must uphold the freedom of establishment – the right of people and companies to carry out business wherever they want. But even here, it is essential to set the right incentives in order to prevent “benefit tourism” and a wave of poverty-driven immigration. Levels of economic wellbeing still diverge greatly throughout Europe; for this reason, when it comes to legislation on access to social security systems, we have to find EU-level solutions that take these differences into account.” DOCM, did you read my table? do you understand it? did you read and understand, what I wrote here: http://www.irisheconomy.ie/index.php/2014/08/28/germany/#comment-1043885 please describe in a few words, what you think I have shown quantitatively there and here. Because if you do not understand what I say, (agreeing is something different !) the discussion makes no sense in this way @ francis No! I did not understand what you are talking about and have no hesitation in admitting it. This is what I am talking about. http://www.irishexaminer.com/business/imf-urges-germany-to-boost-its-infrastructure-investments-tenfold-276242.html Of course, the IMF could be wrong, together with a long list of other commentators and Schaeuble – and he is the architect of the German approach – may be right. I take leave to doubt it. The questions is not even one of economics or investment but one of political appreciation. If, as Schaeuble told Bloomberg, the ECB has come to the end of the road as to what it can do, what does he suggest instead? Both he and Merkel have either been immobile, or forced by events to accept initiatives that would have been unthinkable at the start of the euro crisis. Stephanie Flanders in the FT hit the nail on the head. Both the ECB and governments – essentially those of the EZ – have to move and they cannot do so without some indication of flexibility, imagination and political leadership from Berlin. There is no sign of it! http://www.ft.com/intl/cms/s/0/4219be52-2ec5-11e4-afe4-00144feabdc0.html#axzz3C5FiMB9h @ francis By the way, I think that the judgement of history, when it comes to be written, of the crisis impacting the euro, will be that the IMF (i.e. the US) made the biggest mistake of its history by agreeing to becoming involved in euro bailouts in the first place. http://www.theguardian.com/business/2010/mar/25/angela-merkel-greece-package Germany’s view of the role of the IMF clearly varies with the circumstances. DOCM, I have shown you 2 times in detail, that this “missing infrastructure invest” in Germany is bollocks. Maybe half a percentage point could make sense. If people could derive this from the delta to 21%, like the stupid DIW, FT, IMF, the UK and US would be in a lot more trouble, with their 14 and 15%. And apparently you also dont get, that with less population growth we dont need as much reasonable invest. The IMF has before done stupid political agitation, Olivier Blanchard’s “multipliers” which were ridiculed by Gavyn Davies in the FT. Lagarde had repreatedly tried to agitate for breaking the Euro treaties with “just a little debt relief for Greece” as a door opener. The endless repetition of “liberalize the service market” meaning destroy apprenticeships. We do now export this model instead. The IMF does not have the option whether to engage in Euro countries or not. These countries are individual members, have special drawing RIGHTS. The guardian spelled out that Merkel insisted on the IMF, and Trichet opposed it. To imagine, how this would have played out without the IMF plans, gives me horrors. What did you mean with this link ? @ francis Let me put my argument in the following summary terms. The euro is first and foremost a political undertaking and can only, in the final analysis, be understood in political terms. I always thought it was a foolhardy undertaking but once introduced it was irreversible, short of a major economic upheaval. What the behaviour of the major players in 2010 in relation to Greece demonstrated unequivocally was that they were not – then – prepared to act collectively in defence of the euro, which was their baby and nobody else’s, including the international collectivity which is known as the IMF which has many more deserving mouths to feed. It is not a question of a bridge more or less in Germany in terms of investment or a wrangle among economists about whether this action or that action will be effective but of being shown willing to act collectively. I refer again to the excellent analysis by Stephanie Flanders which is practically the only one that I have read which brings out this fact. The next few months will IMHO prove to be a turning point; either in the right or the wrong direction! A recent Morgan Stanley note in respect of the US private sector said: “By 2012, and after having fallen to a 12-year low in 2000, the average age of industrial equipment shot up to the highest level since 1938.” Governments have limited options in inducing global companies to raise investments in the home country when growth opportunities maybe elsewhere. The author referrd to the “resurgant” US manufacturing sector but that is wide of the mark. Energy costs more in Germany now (it has a higher intensity than the US) but the investments in the renewable sector will likely ensure leadership for Germany in this area in future. No other European country can come close to matching Germany in the global market arena where a small number of huge companies dominate in key sectors. We should hope that Germany can continue to compete in this area as Nokia is an example where the whole region can be at a loss in terms of the impact of procurement if US and Asian companies dominate. German companies are among the biggest R&D investors and they rank with the US, Japan and China for petenting. Airbus is Europe’s shining example of the benefits collaboration in the regions. Comments are closed.