It’s not summer holidays what lead to the bad August of the German economy

Discussion between Angela Merkel, on the right, and José Manuel Barroso during the Western Balkans Summit (EC Audiovisual Services, 28/08/2014)

Discussion between Angela Merkel, on the right, and José Manuel Barroso during the Western Balkans Summit (EC Audiovisual Services, 28/08/2014)

The second quarter was very disappointing in terms of GDP figures for Germany. The biggest European economy is facing tough times at the moment Russia imposes economic sanctions against the EU. It is now more than necessary for Germany to find a way to climb up to growth but its fiscal policy comes as an obstacle to this.

Germany shows signs of economic turmoil

Germany’s GDP growth rate for the second quarter showed a surprising decline of 0.2 per cent.  This was not due to consumer consumption but because export sales and investments failed to boost the economy. More specifically, exports increased by 0.9 per cent compared to the 1.6 per cent rise of imports. Thus, the negative effect of trade balance realized by the difference between exports and imports was a major contributor to the economy’s GDP decline.

What is more, the manufacturing output was modest not only in the Eurozone but in Germany as well. Germany’s manufacturing sector contributed to the slowdown of the economy by showing poor expansion. In particular, the manufacturing Purchasing Manager’s Index (PMI) for Germany, an index which is measuring the sector’s expansion or contraction, if it is above or below 50 accordingly, dropped to 51.4 in August from 52.4 in July. This shows the slowest expansion that the country has realized in the past 11 months in this sector.  It is also worth mentioning that France and Italy, the second and third largest manufacturing economies in the Eurozone, showed contraction with PMI readings below 50. Therefore, it is crucial for Europe and especially for Germany to consider these problems seriously by investigating the causes more in depth and provide permanent solutions.

Russian sanctions & the German economy

The third round of economic sanctions that Europe imposed to Russia was not left unreturned. Russia responded by imposing an embargo for one-year period (starting from the 7th of August) on imports of most of the agricultural products whose country of origin had adopted the aforementioned sanctions. And this had and keeps on having a huge impact on the EU and Germany in particular since it is a heavily export-oriented economy. This effect is fully understood if we consider that Germany is the largest exporter to Russia compared to any other European country reaching 1.6 billion euros in 2013. This and the fact that the Russian sanctions began about a month ago implies that Germany will be heavily affected regarding its exports in the coming third quarter when the consequences of this ban will be more intense. Something that the German government has to take into consideration since a new round of economic sanctions is about to start today from the EU against Russia if the latter is not going to support a peaceful procedure in Eastern Ukraine.

German austerity Vs. Russian sanctions

Further, he German fiscal policy is not working well and may keep on this way if Germany is not going to do something to change the setting. A policy that lies on the grounds of austerity is not going to produce growth neither to the country and nor to the rest of Europe. Of course the issue of the Russian sanctions is of severe importance but on its own is not enough, at least with what we have seen so far, that is diving into deep recession economies of the scale of Germany. Therefore, the sooner Germany realizes that, the better for the Old Continent. It is time for Europe and its biggest economy to admit the fact that this path is leading to greater depression.

Let’s face it and act now!

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

Destabilizing Lebanon after burning Syria; plotting putsch at home: King and Crown Prince of Saudi Arabia

Why Eurozone’s problems may end in a few months

EU members commit to build an integrated gas market and finally cut dependency on Russia

Migration has set EU’s political clock ticking; the stagnating economy cannot help it and Turkey doesn’t cooperate

Earthquake: Monte Dei Paschi Di Siena

European Youth Forum celebrates 20 years of fighting for youth rights

Population in crisis hit EU countries will suffer for decades

Junior Enterprises as a solution for Youth Entrepreneurship

China and UK relations post Brexit as EU addresses Chinese takeovers

European Young Innovators Forum @ European Business Summit 2014: Europe for StartUps, vision 2020

Turkey’s Erdogan provokes the US and the EU by serving jihadists and trading on refugees

The banks want now free capital from taxpayers

What do Europeans believe about the crisis and the possible way out?

Tackling youth unemployment through the eyes of a European entrepreneur

10 months were not enough for the EU to save the environment but 2 days are

Europe’s top court hears Intel and sends € 1.06 bn antitrust fine to review

Will Europe be able to deal with the migration crisis alone if Turkey quits the pact?

France and Poland to block David Cameron’s plans on immigration

Manufacturers Get Smarter for Industry 4.0

It’s EU vs. Google for real: the time is now, the case is open

Elections results: Austerity’s black to prevail in the new multicolored German government

EU free-trade agreements with Canada and US: imagine the fallout if put to national referendums

Managers’ pay under fire

A new world that demands new doctors in the fourth industrial revolution

Governments and non-state actors need to take urgent action to meet Paris Agreement goals

European Commission: Does Apple, Starbucks and Fiat really pay their taxes?

The Americans are preparing for the next financial crisis

Kellen Europe Hosts EuroConference 2016

Failing to see reality or deceiving the masses? The EU about poverty and social exclusion

Eurozone: Economic sentiment-business climate to collapse without support from exports

Eurostat overturns Commission’s assessment of the economy

Can the Americans alone determine the future of Syria?

EU Parliament: It takes real banks to fight unemployment and recession

Is there a chance for the West to win the war on terror?

On Grexit: Incompetence just launched the historic Ultimatum that could open “pandora’s box”

Refugee crisis: Commission proposes a new plan urging EU countries to help Italy

The challenges of mental health: an inconvenient reality

Rising political extremism in Europe escapes control

European Youth Forum demands immediate action & binding agreement on climate change

Four major resources for new European young entrepreneurs

Far from a healthy Health Workforce: lack of workforce planning leaves our citizens without access to proper care

“BEUC cautions against TTIP that would seek to align EU and US chemicals management frameworks”

Crimean crisis: not enough to slow down European indices

Access to health in the developped and developing world

Macro-Financial Assistance: Europe’s way to control Ukraine?

Eurozone: Economic Sentiment Indicator recovering losses

Dutch voters reject EU-Ukraine partnership and open a new pandora’s box for the EU

COP21 Breaking News_03 December: There is a new draft agreement on the negotiating table

CDU-SPD agree the terms for EU’s Banking Union

Who threatens the lives and livelihoods of Ukrainians?

JADE Testimonial #3: Sebastian @ Fundraising

At last a solid base for the European Banking Union

How Greece was destroyed

Will the European Court of Justice change data privacy laws to tackle terrorism?

Youth unemployment: No light at the end of the tunnel

Let the Italians have it their way, it may be good for all Eurozone

The MWC14 Sting Special Edition

Berlin repels proposal for cheaper euro

Is the EU’s enlargement over-stretched?

G20: Less growth, more austerity for developing countries

More Stings?