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!

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Good grub: why we might be eating insects soon

Is flexible working here to stay? We asked 6 companies how to make it work

Minority governments ‘à la mode’ in Europe but can they last long?

Aid used for trade is helping developing countries diversify

Youth unemployment: think out of the box

Japan initiates WTO dispute complaint against Korean duties on steel

The 2030 Agenda for sustainable development and the role of medical students

COP22 addresses a strong global pledge to effectively implement the Paris Agreement

Portugal can use its economic recovery to build up resilience

How is the global economy fairing 11 years after the financial crisis?

11,000 deaths avoided during lockdown in Europe – thanks to cleaner air

UN rights chief denounces Burundi for ‘belligerent and defamatory’ attack on inquiry team

Larger species are more at risk of extinction than smaller ones – here’s why

The Eurogroup protects Germany and blames others

Crisis hit countries cut down public spending on education

Libya: UN mobilized to support thousands uprooted by Tripoli clashes, renews call for humanitarian truce

Forest fires in Sardinia: EU mobilises immediate assistance to Italy

Measles in Europe: infection rates highest in a decade, says UN health agency

Millions denied citizenship due to ideas of national, ethnic or racial ‘purity’: UN rights expert

Guterres in Davos: ‘Dysfunctional’ response to common problems, shows need for effective multilateralism

On World Day to Combat Desertification, UN shines spotlight on ‘true value’ of land

The company of the future must do well by doing good

Why we need artists who strive for social change

FROM THE FIELD: Enslaved Guatemalan indigenous women wait for reparations

State of the Union: Commission sets out new ambitious mission to lead on supercomputing

We’ve lost 60% of wildlife in less than 50 years

Indonesia has a plan to deal with its plastic waste problem

Innovation can transform the way we solve the world’s water challenges

These Harvard scientists think we’ll have to socially distance until 2022

Protecting workers from biological agents: how to classify SARS-CoV-2

These charts show that even before COVID, most children weren’t doing enough exercise

Regional policies slowed down by EU bureaucracy

European Court rules that ECB’s OMT program of 2012 is OK; not a word from Germany about returning the Greek 2010 courtesy

The start-up that believes seaweed can change the world

State aid: Commission publishes results of evaluation of EU State aid rules for agriculture, forestry and rural areas

End racist discrimination against Afro-European people in the EU

5G: How a ‘legion of robots’ could help save the rhino

Elections in Europe: No risks for the EU, leaders readying to face Trump-Brexit

Contribution of healthcare professionals towards the 2030 Global Health Agenda

Brexit talks started with a London handicap and Brussels’ sternness

Germany loses leading export place

Accelerating a more sustainable industrial revolution with digital manufacturing

Chart of the day: These countries have the largest carbon footprints

Beating financial crime: Commission overhauls anti-money laundering and countering the financing of terrorism rules

5 facts to know about Africa’s powerhouse – Nigeria

State aid: Commission approves €3.2 billion public support by seven Member States for a pan-European research and innovation project in all segments of the battery value chain

You’ve heard of 5G, but what about the quantum internet?

UNIDO promotes post-harvest excellence for mangoes in the Mekong River Delta of Viet Nam

Our current internet architecture was conceived for the 1980s. It’s time for an upgrade

Will Merkel ever steer the EU migration Titanic and restore her power in Germany?

UN lauds special chemistry of the periodic table, kicking off 150th anniversary celebrations

Pharmaceuticals in the environment: Commission defines actions to address risks and challenges

Businesses, governments and consumers to implement a more climate-friendly approach to #BeatPlasticPollution on World Environment Day 2018

A skills gap is jeopardizing efforts to end energy poverty

DR Congo: ‘No time to lose’ says newly appointed UN Ebola response coordinator

Security Council resolution endorses moves towards long-sought Afghanistan peace

Libya: Security Council demands commitment to ‘a lasting ceasefire’

UN Afghan Mission ‘outraged’ by deadly Taliban attack in Kabul, as hardline group threatens election violence

Multilateralism must weather ‘challenges of today and tomorrow’ Guterres tells Paris Peace Forum

Khashoggi murder trials must public and meet international standards, UN expert urges

More Stings?

%d bloggers like this: