"The country has benefited enormously from its historic strengths in capital goods, luxury cars and chemicals exactly matching demand from fast-growing emerging markets. In addition, the labour market reforms of Gerhard Schröder’s government at the start of the century have led to strong wage restraint, increasing the sector’s price competitiveness. (...) The factors behind these successes are now under pressure. Economic growth in emerging markets has slowed. Beijing is trying to rebalance the Chinese economy from an investment-driven growth model to a consumption-driven one. In Europe, investment remains weak. All this translates into lower demand for German goods abroad. (...) Meanwhile, one result of the crisis is that wages have been pushed down across Europe, while German wages have slowly been increasing thanks to the low rate of unemployment (especially in the south of the country). In addition, the foundations for doing business in Germany are deteriorating, increasing costs for companies and making flexibility more difficult. Public spending on education and on research and development as a share of output might not be as dismal as in Italy, but after severe cuts from the mid-1990s onwards, it now trails behind a number of countries that belong to the OECD, the Paris-based club of mostly rich nations, such as Austria, Finland and France. For roughly a decade now, public investment has been lower than the depreciation of public capital. For a while, these trends were not widely noticed. After the investment boom following reunification in the early 1990s, infrastructure was in a relatively good state. But potholes are increasingly evident on the roads. The recent flooding led to the most important main artery in train traffic from Berlin to the west of the country being closed for the rest of the year, more than doubling the travel time from the capital to Volkswagen’s headquarters in Wolfsburg."
Posted on: Fri, 30 Aug 2013 08:08:17 +0000
Trending Topics
Recently Viewed Topics
© 2015