Germany’s booming economy and the decline in unemployment has long been isolated from the crisis with the euro on Europe’s periphery. This time, however, is coming to an end. German economy already showing signs that it is also vulnerable, but Chancellor Angela Merkel was forced to make sacrifices, writes in his analysis of German magazine Spiegel.
For the last 10 days the stock exchange index DAX, which includes blue chip of Europe’s largest economy, fell by 16%. The stock decline is a warning, just as happened last summer when the DAX lost 30% within just a few weeks, sparking a wave of political moves.
Thus, a summit was followed by another as a result of which lent increasing rescue funds. Meanwhile the German government tried to combat the problem by simply prohibit short selling investors not to enable them to make bets on the sinking stock prices. A widespread belief in Germany is that everything that happens affects only the financial markets.
This is perhaps the biggest problem the Germans in a crisis with two-year euro. For Germans, this crisis has always belonged to others – Greeks, Portuguese, Spaniards and Italians. They say they have not kept their finances under control and now it is clear that we should adopt the German model. For their part the economy is booming and people have jobs, and Germany is an island of prosperity amidst a sea of misery.
But now even the most stubborn have begun to realize that this concept can not work. Falling stock prices are just one of many indicators. Sales managers talk about the unfavorable prospects for months, and in May Ifo index of business climate – one of the leading economic indicators fell for the first time in six months.
Even the leading automotive export industry, usually spoiled by the successes recorded their first downs in May. In the same month last year, production fell by 17%, while exports declined by 13%. For comparison – EU-wide auto sales fell by 7% in April yoy.
German companies are now seriously worried that the crisis that began in the outskirts of Europe, is increasingly coming to the center. And the fear is justified. A national economy, no matter how strong, can not remain aloof from the general trend in the long run. Businesses recognize that sharply falling demand from countries affected by the crisis, and managers aware that this may be just the beginning.
The fact that Germany bore on his back so little of the crisis so far, due largely to emerging markets like China, India, Brazil and Russia. Their economies are booming, and companies and consumers in developing economies willingly buy German products. One example – the number of imported German cars in China marked a record in 2011
But things do not go here. China’s economy stopped growing as fast as it did a year ago, and Russia felt the effects of the crisis in the form of currency turbulence. Not to mention that the U.S., the largest economy in the world, just slow down and face serious problems.
All this makes even more important Germans finally realize how deeply mired in crisis. And just to stand side no longer an option. When investors from Asia or the U.S. lose confidence in the euro area and decide to withdraw money from Europe, Germany will also feel the effects.
What to do
In the interest of Germany to solve problems quickly and continuously threatening the monetary union. Therefore require more radical steps than those that Germany is prepared to take at this stage. This applies to both government and Chancellor Angela Merkel, but also for the German nation as a whole, so far violently rejected the prospect of the country to give up power or money to save the euro.
In the end should be just that. Without economic government and true fiscal union, the euro will not survive. European leaders already have a significant impact on the budgets of countries in crisis. Moreover, fiscal pact already agreed 25 of 27 Member States of the EU summit in January, also requires signatories to exercise fiscal responsibility.
However, these measures are incomplete and temporary. Saving the euro requires European countries, including Germany, to give up part of their independence and to adopt more collaborative solutions. And eventually the eurozone countries should be collectively responsible for its debts.