Is Germany’s Economy in Danger?

May 31, 2016


Self-satisfaction is accredited to be one of the biggest dangers to the economy of Germany as it fell out of the top 10 most competitive economies in the world.


The German economy is not exactly in a good shape, plagued by the weakening in foreign trade, especially with China. It took a toll on retail sales as they dropped for a second consecutive time in April by 0.9%.

Boasting an impressive list of participants of 5,400 managers and 342 criteria, the list of the world’s most competitive economies was conducted by the Swiss business school IMD. Hong Kong took the first place, with Switzerland and the United States took second and third.

Another country responsible for Germany’s weak foreign trade is France, which is one of Germany’s closest trading partners. France’s economy is struggling against the backdrop of terrorist attacks and political unrest, which dampens the demand for German exports.

The ECB also played a role in holding back the German economy. Now, low interest rates are not every country’s cup of tea. It’s certainly not a cup of tea of Germany as its politicians are not shying away from criticizing the central bank.

In March, German Finance Minister Wolfgang Schaeuble said on record that low interest rates were stirring up trouble in the country by creating the exact environment when bubbles are forming.

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For instance, the low interest rates leads to a misallocation of resources. The ordinary Germans can also feel their effect as their retirement provisions get affected.

The bank is also sending out the wrong message to the people, according to Transport Minister Alexander Dobrindt. Cutting the rates can be interpreted as there’s no need to put money into savings or retirement plans.

Later, Schaeuble didn’t hold back when he said the ECB did not implement the best monetary policy for Germany because it had to take care of the entire euro zone.

Volkswagen is expected to report its first-quarter earnings very soon, and the company could reveal how much damage Dieselgate has inflicted to the company’s earnings specifically and to German’s economy in general.

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