this post was submitted on 15 Jun 2023
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The biggest economy in the euro area, Germany’s, is in a bad way. And its ills are a main cause of the euro’s own weakness. (a throwback to 1999) (www.economist.com)
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[–] yogthos@lemmy.ml -1 points 1 year ago (1 children)

A lot of the predictions the article makes are now coming true.

[–] DesGrieux@sh.itjust.works 0 points 1 year ago (1 children)

What predictions? They're making predictions about the next year... in 1999, and not many specific ones either, just saying prospects are bleak. I don't see any predictions about the 2020s.

In fact, German GDP has nearly tripled since this was written. The only months of no growth were during 2008 and COVID and Germany outperformed all its neighbors. They didn't predict any of the conditions for either of those crises.

[–] yogthos@lemmy.ml -1 points 1 year ago (2 children)

They discuss the trends, and it's true that Germany managed to show continuous growth, in large part thanks to Chinese market. We'll see whether this trend continues now.

[–] DesGrieux@sh.itjust.works 0 points 1 year ago (1 children)

They discuss the trends,

You need to be more specific. Can you copy and paste one?

[–] yogthos@lemmy.ml 0 points 1 year ago (2 children)

sure

First, it observes that Germany has limited options to economic problems. The options are to either raise rates or allow inflation to grow. The fact that both options are problematic is why Germany has entered a recession this year:

In the run-up to the euro's launch, German monetary policy was constrained by the need for most European countries to converge on a single euro-wide interest rate; and fiscal policy has been kept in check by the need to comply with the single-currency countries' “growth and stability pact”. These constraints still bind: left to itself, Germany might respond to its latest bout of weakness with lower interest rates and a bigger budget deficit, but it no longer has these options.

Another point is regarding the orientation German markets. In particular, German economy is heavily dependent on China right now. While Chinese economy is doing well, there is now a push to decouple from it which will further hurt German economy:

A second spanner in the works was the economic crisis in emerging markets. Germany sends more of its GDP abroad than any other big European country (around 30%), with roughly a quarter of that going to emerging economies—and so has suffered more than most. The collapse of Asian markets hit basic producer goods especially hard; along with capital goods, these make up as much as four-fifths of Germany's exports. Many German exports, such as chemicals and aluminium, were already suffering from global overcapacity before the crisis hit Thailand in mid-1997. The meltdown in Russia, formerly another big export market, has not helped either. It is striking how far Germany's share of world exports has fallen since the early 1990s.

Another problem the article identifies is the high labour cost in Germany, and this is particularly relevant since Germany is competing with China in the manufacturing sector right now:

Mr Schmieding thinks that Germany's high costs relative to what it produces help to explain why unemployment has risen from cycle to cycle since the 1960s. German workers may be productive, but not enough to justify costs that are running at 50% above levels in any other G7 country. Getting rid of workers is costly too. Severance pay is typically a month's salary per year worked, plus generous retirement pay-offs for older workers. “The jobs market doesn't really deserve to be called a market,” says one disgruntled company manager.

These are just a few examples that you evidently missed while reading the article.

[–] DesGrieux@sh.itjust.works 0 points 1 year ago (1 children)

Literally none of those things are predictions for the 2020s. Those are just issues from 24 years ago with suggested (neoliberal) solutions.

Germany largely addressed those concerns as you can see from the huge uptick in economic activity starting in 2000. The article did not predict the 2008 crisis, it did not predict the crisis with Russian gas, and so I'm having a hard time understanding why you're trying to slip this by people outside of a history community and acting like it's relevant.

[–] yogthos@lemmy.ml -1 points 1 year ago

Yet, as I explained, all of those underlying factors are very much at play in 2020s. Meanwhile, nowhere am I endorsing the neoliberal solutions the article mentions. And as we see from the current recession Germany is in, the concerns are very much still there.

[–] g7s@lemmy.ml 0 points 1 year ago (1 children)

High standards need high costs. There is a reason why "made in china" is alias for cheap crap, don't buy

[–] yogthos@lemmy.ml 1 points 1 year ago

Chinese goods have been as high quality as any western goods for a long time now. This is just another trope westerners use to cope with the fact that China is now surpassing the west across the board. Some of the most advanced technologies come from China nowadays.

[–] animist@lemmy.one 0 points 1 year ago (1 children)

Serious question, not being snarky. Do you have a link to your source showing Germany's consistent export markets and their percentage of exports?