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

Featured Stings

Can elections in Italy and Germany derail Eurozone?

My unlimited China

Will CETA be implemented after eight long years or it will be vetoed by the EU citizen?

Why Eurozone’s problems may end in a few months

Yes, together we can make a change! YO!Fest and EYE 2016

A Sting Exclusive: “Doing ourselves a favour”, Vice President Dombrovskis underscores that this time growth has to come from within the EU

EU will not deliver on promises without democratic accountability

No agreement in sight on EU budget

Can the EU afford a trade war with China?

Google strongly rejects EU antitrust charges and now gets ready for the worst to come

China Unlimited: an exclusive interview with the former Ambassador of Hungary to China

Does Greece really weigh what is asking for today in Russia?

Does the West play the Syrian game in Egypt?

Inflation keeps falling in Eurozone

London, Berlin, Paris to fight over EU budget

When will Eurozone’s unemployment rate stop being Europe’s worst nightmare?

European Business Summit 2014: The role of youth entrepreneurship education in EU’s Strategy for Competitiveness

European Employment Forum 2013 and not European Unemployment Forum 2014

EU to finance new investment projects with extra borrowing; French and Italian deficits to be tolerated

Higher education becoming again a privilege of the wealthy?

What lessons to draw from the destruction of Syria

Unemployment and stagnation can tear Eurozone apart if austere policies persist

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

Brexit casts a shadow over the LSE – Deutsche Börse merger: a tracer of how or if brexit is to be implemented

Why growth is now a one way road for Eurozone

The EU spent €158 billion on vague, open-ended rural projects

Eurozone’s credibility rock solid

In China things are moving in the right direction

Whose interests are protected by the new Mortgage Directive?

MasterCard @ MWC14: Innovation in times of regulatory uncertainty

Refugee crisis update: Commission still in panic while Turkey is to be added in the equation

Zhua Zhou: Choosing The Future

Can privatisation be the panacea for the lack of growth in Europe?

Will the three major parties retain control of the new EU Parliament?

The EU lets the bankers go on rigging the benchmarks

A young person’s perspective on the Paris and Beirut attacks and aftermath

EntEx Organises 5 Summer Schools for Young Entrepreneurs across Europe in June/July 2014

Greece’s Tsipras: Risking country and Eurozone or securing an extra argument for creditors?

JADE Testimonial #1: Marcello @ Enlargement

A Sting Exclusive: “The challenge of Society’s digital transformation”, Spanish Minister of Spain for Industry, Energy and Tourism José Manuel Soria live from European Business Summit 2015

Eurasian Union begins: the giant modelled on the EU is Moscow’s biggest challenge

The increasing drug prices in Europe

EU out to conquer African Union summit

More capital and liquidity for the banks

EU citizens disenchanted with Economic and Monetary Union over rising poverty and high unemployment

COP21 Breaking News_03 December: Unprecedented Global Alliance for Buildings and Construction to Combat Climate Change

Mario Draghi didn’t do it but Kim Jong-un did

The eighth round of TTIP negotiations concludes in Brussels amid scepticism and new fears

Eurozone’s bank resolution mechanism takes a blow

Commission: Do it like the Americans in the food sector

More Stings?