• 
• 
• 
• 
• 
• 
• 

Print this page

Send by mail

RSS feed

Contact us

Add to Favourites

Increase font size

Decrease font size

Within the recovery of the German economy—considered "the sick man of Europe" before the crisis—two phenomena stand out, each with different causes and effects.

The first is cyclical catching-up, already nearly complete.
On the one hand, the German economy, more so than its neighbours, suffered from the collapse in international trade in 2008-2009 due to its elevated export rate (nearly 50% of GDP vs. 30% in France).
On the other, it is now benefiting to a greater extent from the global recovery in demand, especially in emerging economies, and from the fall of the euro in the first half of 2009. Export volumes have thus almost regained their record level from the start of 2008—bringing industry, investment and jobs up with them.
This recovery will nonetheless probably last only until 2011, when more restrictive fiscal policies will hit Europe and Asian growth will moderate.

The second phenomenon is more structural.
Convergence toward a more favourable growth path, set in motion by the significant reforms of the 2000s, has restored competitiveness, relaxed the job market and reduced obstacles in social and personal services employment. As a result, there has been a structural decline in unemployment.
Furthermore, public finances benefited from pre-crisis reforms and weathered the storm better than elsewhere in Europe. Their rebalancing will thus be easier and weigh less heavily on growth.
Contrary to the last decade, Germany could therefore see higher growth than its European neighbours for several years, even if its substantial outperformance observed in the first half of 2010 cannot be projected further. There is, however, one important caveat: population decline, which will increasingly hold back its growth potential.

Will Europe benefit from this good health?
Yes—at least partially. Germany's imports, including those coming in from the euro area, are very much correlated with its exports. In other words, Germany's imports from neighbours tend in large part to become its exports. Moreover, consumption—and therefore imports—will benefit from the sustainable decline in unemployment.