Germany on Edge of Recession in Report Critical of Merkel

[Purveyor]

Source: Bloomberg

By Rainer Buergin and Brian Parkin Oct 9, 2014 11:40 AM ET

Germany’s economy is on the edge of recession as exports to China and Russia sag and Chancellor Angela Merkel’s domestic policies hold back growth, four economic institutes said in a report.

Europe’s biggest economy probably posted zero growth in the third quarter and will expand by 0.1 percent in the fourth after shrinking 0.2 percent in the second, according to the fall outlook presented today by the institutes advising the government. The group cut its 2014 growth forecast to 1.3 percent from 1.9 percent in April and trimmed next year’s to 1.2 percent from 2.0 percent.

“This year, we have some weakening,” Finance Minister Wolfgang Schaeuble said in Washington today, citing global crises such as the Ukraine conflict and the effect of sanctions against Russia. “We don’t have a recession in Germany.”

The twice-yearly forecast adds to evidence that Merkel’s focus on balancing the budget and promoting exports is failing to sustain projected growth as key foreign markets for German goods falter. Merkel is partly to blame by boosting burdens on business with measures such as the national minimum wage rolled out this year, the forecasters said.

Read more: http://www.bloomberg.com/news/2014-10-09/germany-on-edge-of-recession-in-report-critical-of-merkel.html

[ffr]

1. Break the stereotype

Two quarters of a shrinking economy used to be part of the definition of a recession. However, Germany's population is declining, so technically they have fewer consumers. This is natural, not alarming.

[DFW]

2. It's not the minimum wage that's holding German growth down

It's their cumbersome bureaucracy with their dozens of tiny taxes here and there and endless forms to fill out that strip small businesses of their ability to operate efficiently. It's even far worse in places like France and Belgium, where the bloated number of government bureaucrats has given rise to institutionalized government corruption and outright stealing from small businesses. In both countries, brigades of "official" auditors and customs agents go around to small businesses and effectively tell them to pay a "fine" for some imagined offense, or face temporary closure and confiscation of their inventory. One such "agent" in France was so blatant, he got caught on tape stealing from a small shop owner, and was transferred (they can't be fired) to checking baggage at the airport.

No one could have planned the Ukranian situation and the resulting drop in German exports to a Russia still rich in raw materials to trade for German manufactured goods. Merkel COULD have decided to tell the rest of the West to fuck off, and that Putin's money was a good as anyone else's. That she showed solidarity with the rest of the West, knowing full well that her country's otherwise healthy economy would suffer as a result, shows some steel that a few other western leaders could do well to emulate.

[KoKo]

3. Interesting...

but, which other Western leaders do you mean who haven't shown "steel?"

How can Germans feel confident with their bonds now yielding below 1%? Isn't this going to be seen as austerity? And, aren't the sanctions hurting exports to Russia by countries in the Eurozone already suffering under austerity programs? The small farmers and small businesses that depend on Russian consumer demand for their goods. How is this helpful to them?

Putin is saying that he wants Russia to be less dependent on agricultural/dairy products imported from other countries and focus on expanding it's own local farming/dairy interests. He feels this is an opportunity for Russia to become more self-sufficient for the future. Putin is anti-GMO products and Monsanto is ready to move into the Ukraine Bread Basket. Maybe he has another area in Russia where non GMO wheat can be grown to compete with GMO/Ukraine. His organic farming fantasy might not be so far-fetched. But, that will be some time in coming. So...the people suffer with these sanctions and one wonders who benefits if there is huge unrest. Why do this?

[DFW]

4. Especially Hollande

I realize that governing Spain and/or Italy is nearly impossible, but they have to be counted nonetheless. GMO stuff is hated almost universally in Europe. Monsanto is a dirty word here. If they move into the Ukraine, Europe is fucked, because the winds will have their Frankenstein seeds blown all over the continent within ten years. The sanctions are mostly hurting big industry who likes to schmooze with Russian big money. Former SPD chancellor Schröder, for example works for "Putinoil, Inc." HE suffers, though probably not much. All Russia has to do is sell the oil to the Gulf Arabs, who re-label it, and voilà, problem solved. Same route for products to Russia. Sanctions are rather porous these days. Probably a good time to own a fleet of container ships, though.

Germans are not exactly "confident," but they don't feel they are being led by a bunch of incompetent morons like most of their neighbors (Switzerland excepted, although my Swiss friends a furious about their leadership joining Schengen, and with good reason). What we call "austerity" here in Germany would be called "rampant tax-and-spend" in the States. People here mostly still get medical care, if not fully and comprehensively for every one. They still all have access to free schools, free universities, subsidized public transportation. You have to take it in context. You can't just pluck terms out of the air when they mean different things in different countries. Putin is right when he says he wants Russia to be self-sufficient in food. It is absolutely ridiculous that a country so rich in land can't feed itself, even without the Ukraine. OK, 70+ years of "socialism (not!, but they called it that)" wrecked their economy, but the government could have supported agriculture after 1991 instead of telling their rural population, "OK, guys, you're on yer own!" You can't just tell that to people who spent the last four generations on a колхоз, being told what do to every waking minute of the day.

As for unrest, here in Western Europe, the biggest strikes this fall have been Air France Pilots, Lufthansa pilots, and the GDL (Gewerkschaft Deutscher Lokomotivführer) who have been the biggest boon to taxi drivers since the invention of the internal combustion engine. Nothing to do with Putin whatsoever.

[KoKo]

5. Your view is always an interesting read...Thanks!

Last edited Thu Oct 9, 2014, 08:08 PM - Edit history (1)

Our company just had a visitor from Germany who echoes much of what you say.

Although Russia and Putin was not discussed in the visit, it did seem that "Austerity" is viewed differently in countries who have much access to Freedoms that others do not have. And countries like Germany who provide Free Education compared to USA where students have never ending debt suffer. Plus our Credit Card Use and Home Ownership which in Germany is not as common.

But, what if the "PTB/Bankers" want to go after Germany to put them on equal footing with America's new "Privatization for Profit" of everything under the IMF and TPIP Negotiations which Obama still is pushing? WHAT IF....Germany's "Freedoms" could be subject to New Rules that make them more on par with what USA is doing and the IMF and this is just a step with the "Trade Agreements" to move Germany and Eurozone to the GLOBAL STANDARDS....that are agreed on to move Economic Reform Forward. Bloomberg Business "Insiders" who work with the US/Global Think Tanks are saying that Germany's Benefits for their Workers needs REFORM. IOWD's ...

Germany is top liberal to its workers (in the Global Think Tanks Minds) and therefore: "Extending the Work Week Hours, Cutting Benefits and Reforming the Education System like the USA has is what needs to be done for the Global Economy to Survive. Bloomberg Business has the Major US Think Tanks on...working to Reform the Global System for Parity with China and Emerging Markets where the Workers ...work for less and the Profiteers Gain More.

That's what is worrisome to me and others. But, maybe you feel Germany is immune from this kind of thing? An assault on the best of their reforms and the rest of the Eurozone falling in line with Cameron's view of how the world works and our own USA Interests?