The German economy is recovering but the foundation is still fragile

The German economy has rebounded from the bottom in the second quarter of this year in the four consecutive quarters of negative growth. In the third quarter, we continued to maintain the momentum of recovery, and imports also increased significantly. The overall situation is clearly much stronger than in the second quarter. In view of the record for the third quarter of German companies in this year, it is widely believed that the German economy is still developing in the fourth quarter.

In order to illustrate the trend of the German economy, it is necessary to review the operation of the entire economy since the beginning of 2008. Objectively speaking, the German economy has been declining since the second quarter of last year. The first quarter also increased by 1.6% from the fourth quarter of 2007, and the entire economy began to shrink in the second quarter. Compared with the previous quarter, the economy shrank 0.6% in the second quarter. The third quarter shrank by 0.3% from the second quarter. The fourth quarter reached the peak of last year's economic contraction, and GDP fell by 2.4% from the previous quarter. Despite this, the German economy has increased by 1.3% from the full year. This was mainly due to the substantial growth in the first quarter, and the shrinkage in the last three quarters failed to drag the German economy into a quagmire of negative growth.

The economic situation this year is completely different from last year. If the German economy was still a good start in the first quarter of last year, then the overall economic situation in the first quarter of this year was dark or dark. Compared with the fourth quarter of last year, the economy has even shrunk by 3.5%. This is the worst quarter since Germany had a quarterly record in 1970. Compared with the same period last year, the economy shrank by 6.7%. At this point, the German economy fell to the bottom.

The German government threw the first stimulus plan from October 2008. A second economic stimulus package was launched in early 2009. This series of initiatives began to ferment in the second quarter. The economy has rebounded, but the intensity is very limited. The economy grew by only 0.4% from the previous quarter and a negative growth of 5.8% compared to the same period last year. Compared with the second quarter, the economy grew by 0.7% in the third quarter, but it still shrank by 4.8% compared with the same period last year. The economic growth rate in the fourth quarter, German economists and major research institutions are forecast to be between 0.7% and 0.9%, but compared with the same period last year, it is still a negative growth of more than 4%. From this it can be concluded that in 2009 Germany's GDP will be reduced by 4.8%-5% compared with 2008.

Some people in Germany called the economic recovery in the second quarter "pseudo-growth" because imports fell more than exports compared with the previous quarter. This shows that domestic demand is insufficient and the economic situation has not improved. The reason for the recovery is mainly due to the increase in exports. This shows that the international environment has changed, which has stimulated the warming of the German economy. The situation in the third quarter is significantly different from the second quarter. This is because imports have also increased, indicating that domestic demand has begun to rise. It is precisely because the import and export have rebounded significantly from the previous quarter, so the German academic community agreed that the German economy has really turned from the second half of the year. From here, we can see a trend in the international academic community that domestic demand cannot stimulate economic growth and cannot be considered true growth. The growth of export-led growth can only show that foreign demand has increased, and has nothing to do with the domestic economic situation.

Although the German economy has begun to turn, the foundation is not solid. The basis for this is that the current economic recovery is mainly due to the international market. In other words, it is a foreign demand, “especially China and the Arab world have increased the demand for German products” to help Germany weather the storm. At present, the global market is not certain, and there are still many unstable factors. This determines that the future trend of the German economy is not likely to move forward steadily. Secondly, some measures to stimulate the economy in China have also begun to withdraw, which will also have a certain impact on German domestic demand. For example, the policy of trade-in for German cars has expired. This policy has a positive effect on the sales of automobiles this year and even the recovery of the entire economy. But there is also a negative impact, that is, the consumption potential is released in advance.

Another factor limiting Germany’s economic growth is that SME loans remain difficult. In order to solve this problem, German Chancellor Angela Merkel held an economic summit including the banking giants and business tycoons at the Prime Minister's Office on December 2 this year to discuss the path to solve this problem. However, public opinion generally believes that the solution to this problem is not as simple as imagined. This is first of all because the reform of the world financial system requires banks to greatly increase their own capital or adequacy ratio. Secondly, the European Central Bank's low interest rate policy has caused commercial banks to lose interest in risking loans to others. Instead of lending money to others, you can't make money. It's better to keep your money and enrich your own capital.

In November this year, the number of unemployed people in Germany was 3.215 million, a decrease of 13,000 compared with October, but it increased by 227,000 compared with the same period last year. This is the statistics released by the German Federal Labor Office on December 1. The unemployment rate in November was 7.6%, compared with 7.1% in the same period last year. The German “Five Sage Committee” submitted an economic consultation report to the German Federal Government on November 10 this year. According to the report, the average unemployed population in Germany this year was 3.432 million. It is estimated that the average number of unemployed people in the whole year will reach 3.965 million. There is a lag period between the labor market and the economic situation. So the unemployment problem next year is far more serious than this year.

The seriousness of unemployment involves two issues. First, domestic consumption; second, the state's fiscal revenue and expenditure. If the number of unemployed people reaches nearly 4 million next year, which is more than 500,000 more than this year, it will have a direct impact on domestic consumption, which will drag down economic growth or recovery. From the current point of view, rising unemployment is a shadow of the economic trend next year. From the perspective of state finance, the increase in unemployment means a reduction in state finances. On the other hand, an increase in unemployment benefits means an increase in spending. This counter-it is precisely the burden of public finances.

The "five sages" believe that Germany's fiscal deficit this year has accounted for 3% of GDP. This proportion will rise to 5.1% next year, far greater than the 3% of the EU Stability Treaty. Germany’s debt balance last year accounted for 65.8% of GDP. This year's share is 71.8%. This proportion will rise to 75.3% next year. The implication is to ask the government to reduce spending. What does reducing spending mean for economic growth? ! Despite this, the “Five Sages” still insist that the German economy will grow by 1.6% in 2010.

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