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German economy, Europe’s last hope, begins to slump

German economy, Europe’s last hope, begins to slump. Despite a drumbeat of optimistic forecasts from economists and upbeat statements from various European leaders, the actual news on the economy continues to be grim, with figures released Tuesday showing that Germany, the continent’s flagship economy, contracted by about 0.5% in the final months of last year.


Combined with a flurry of disappointing results in other major economies, the stumble raised questions about Europe’s ability to escape recession.

Portugal’s central bank cut its economic forecast for the year on Tuesday, saying its economy will contract more steeply than expected. France said it was likely to miss its target for narrowing the budget deficit, raising the prospects of deeper spending cuts and additional taxes. Last month, Britain said its austerity budgets would extend three extra years, to 2018, because of weaker than expected growth.

“This idea that Germany is a powerhouse dragging the rest of Europe along with it is a bit of a myth to be honest,” said Philip Whyte, a senior research fellow at the Centre for European Reform in London. “You have a very weak periphery and a core which is not as strong as everyone seems to believe.”

Throughout the debt crisis, Germany has managed to float above the bad news, enjoying record employment, rock-bottom borrowing costs and export-led growth that kept chugging, in spite of the cloud hanging over the euro zone. But its European partners are also among its biggest customers, leaving it vulnerable to the continent-wide slowdown exacerbated by the very austerity policies of Chancellor Angela Merkel.

“The longer the euro crisis lasts, the more difficult the situation becomes for Germany,” said Stefan Kooths, an economist at the Kiel Institute for the World Economy. “Germany is not a Teflon economy.”

The German government is scheduled to release its report on the economy on Wednesday, and it will forecast growth in 2013 of 0.5%, the newspaper Handelsblatt reported. In the euro zone as a whole, which is in recession with record unemployment, any growth is considered positive. But most forecasts are based on the assumption that financial markets will remain calm. If anything shakes investor confidence, like political turmoil in Italy or Greece, the weak growth rate means Germany would not have much cushion against recession.

France will probably miss its deficit reduction target for 2012, according to preliminary data released Tuesday by the French government. Officials in Paris aimed for a deficit of 4.5% of gross domestic product, but data for November suggests the shortfall will be 4.8%, ING Bank estimated.

That means President Francois Hollande would have to find an additional $6.65 billion in revenue to meet the 2013 budget target, and France could face another credit rating downgrade. The data also shows the challenge of keeping France’s overall debt level from rising above its current level of more than 90% of GDP.

By contrast, Germany’s public finances are robust. Federal, state and local governments recorded a surplus for the year equal to 0.1% of GDP, the first government surplus since 2007. That creates leeway for Merkel to stimulate the economy with public spending if the downturn is worse than expected.

Despite the contraction in the fourth quarter, a compilation of annual economic data by the statistical office showed that the German economy is in fundamentally good shape. Exports rose 4.1% during the year, and 41.6 million people were employed — a record high and the sixth annual increase in a row.

And Jorg Kramer, chief economist at Commerzbank in Frankfurt, said in a note to clients that he expected the German economy to expand again in the first half of the year.

Still, Whyte, of the Center for European Reform, said that while he was more optimistic than at this time last year, “we’re still not out of the woods.” NYT


Added: Jan-17-2013 Occurred On: Jan-17-2013
By: Media File
In:
World News
Tags: German economy, Europe’s last hope, begins to slump. Despite a drumbeat of optimistic forecasts from economists and upbeat statements from various European leaders, the actual news on the economy continues to be grim, with figures released Tuesday showi
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  • i can only think of one thing.... BULLSHITTtt.

    Posted Jan-17-2013 By 

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  • It makes sense that as recession bites demand for German goods will drop. I cant see the Spanish,Greeks.or lots of others wanting luxury goods from Germany. Fuck they already got people eating horses!

    Posted Jan-17-2013 By 

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    • @drivenwell2
      the markets german exports feed from are the US and China. Europe is not deceisive.

      Posted Jan-17-2013 By 

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    • @Simba1

      Sorry but no. Most came from Europe, from the horribly named PIGS, thus the slump in the German economy. And also, I defend that this economic crunch is global, when we hear that the far east or South American economies are up and running, it is always referred to macro-economic numbers, but the truth is that the people are not significantly improving their economic levels. The gap between the rich and the poor is growing everywhere, starting in Germany and ending in Brazil, Colombia More..

      Posted Jan-17-2013 By 

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    • @Simba1 Is called the domino effect.The slow down has hit china and America.China is a main exporter to europe,that is why they bought lots of euro bonds.

      Posted Jan-17-2013 By 

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    • @drivenwell2 Actually, you can get horse meat here at the supermarket as well if you'd like.

      Posted Nov-20-2013 By 

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    • @Care_HerrBear I know I have been to Germany several times. I was surprised what a nice place it was. The argument about eating horse meat,is horse meat is a lot cheaper than beef. Manufacturing cheap so called beef dishes for the poor,but putting cheap horse meat in instead.

      Posted Nov-21-2013 By 

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  • It won't be long until Germany drops out of the European Union. It's the only economy making anything in a positive direction, on paper at least. But one country can't support the rest of them. One reason their balance sheets look so good at this time is that they're loaning everyone else the money to continue their operations. But, everyone else has no money to repay them. Their debt exceeds their ability to repay(AND the U.S. isn't any better thanks to idiot politicians). It's not a good scena More..

    Posted Jan-17-2013 By 

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  • Fuck the EU. Time to call it a day.

    Posted Jan-17-2013 By 

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  • We are being foredoomed to starvation because of the austerity measures enforced by the IV Reich, they don't understand that millions of citizens are taking frog leaps into lifelong poverty and hardship and sooner or later the whole landmass would be dragged into renewed financial hardship. Like pieces of domino, we are falling down one at a time, until the huge Euroshit bubble bursts and sends us straight into the hands of the almighty Jewry

    Posted Jan-17-2013 By 

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    • @Batarian

      I fully agree with you. We will have no doubts, but that will help us very little. The population of Europe will reach the level they had just after WWII ended if this situation keeps on going.

      Posted Jan-17-2013 By 

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  • Comment of user 'PolishWingedHussar' has been deleted by author (after account deletion)!
  • Israel took all the money lol

    Posted Jan-17-2013 By 

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  • DEBT DEBT DEBT DEBT.....KEEP Running up the tab....DEBT DEBT DEBT.......Make them all in DEBT. That's the only way for the NEW WORLD ORDER to come into place. All nations......drowning in Debt with no way out.

    Oh but wait.......WE HAVE THE SOLUTION.....Here you go Earth ! Now we own your asses. Thanks FED.

    Posted Jan-17-2013 By 

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