Monday, August 15, 2011

Germany has the (economic) power...

...and is using it.

The European economy is a mess, with three nations already having gone into default and others trying to avoid such a fate. But there is one nation that at least so far has been able to avoid the economic miseries -- Germany.

As the New York Times reports, a healthy German economy is a measure of pride for the German people, who are hesitant to hand out money to their struggling neighbors.
Germany may be the only European nation that is large enough and rich enough to cover the debts of its struggling neighbors, but its citizens are reluctant to be the source of the bailout. Germany is in many ways in the eye of the storm, with barely a hint of the winds swirling nearby. There is no tear gas, as in Athens; no tires burning, as in London; no chanting crowds packing public squares, as in Spain. While much of the rest of Europe is struggling to pass harsh austerity packages, Germany is in the midst of a debate over cutting taxes by as much as $14.2 billion.
“It’s as if there’s this black cloud floating overhead but nothing has fallen on us,” said Markus Ponick, 38, a teacher in Berlin, who on Monday was strolling down a tree-lined stretch of Bleibtreustrasse with a cup of coffee in his hand. The government had made cuts, Mr. Ponick said, but they had been “cleverly chosen” to spare the public pain. “The effects of this crisis are imperceptible here,” he said.
Nevertheless, as the Telegraph notes, there is a realization among Germany's political elite that it must do something to aide its neighbors.

One of the ideas being discussed -- especially between Germany and France -- is a so-called Eurobond; however, as of now that idea is controversial and opposed by Germany's chancellor Angela Merkel.

The Wall Street Journal acknowledges that Germany's economy is strong, but it also is willing to ask if it is beginning to tap the brakes on growth.
"There's no doubt that we're witnessing a certain slowdown," said Timo Klein, a senior economist at IHS Global Insight in Frankfurt. "Exports won't soften in absolute terms yet, but export growth is likely to have weakened."
Germany's economy probably grew by 0.4% quarter-to-quarter in the April-June period, and by 3.1% in year-to-year terms, analysts say.
That would mark a considerable slowdown from the first quarter, when growth was a blistering 1.5% quarter-to-quarter and 4.9% year-to-year, driven by a cyclical investment boom and construction projects delayed by adverse weather in December, analysts said.
Still, at 3.1%, annual growth looks rosy compared with much of the euro zone. France's economy didn't grow at all in the second quarter, according to data released last week, while Greece's economy contracted by an annual 6.9%, the country's statistics service said Friday.

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