Home German GDP Analysis: Good news for Germany, bad news for

German GDP Analysis: Good news for Germany, bad news for

Germany avoided a technical recession and managed to claw some growth.  It also  enjoyed upwards revisions and a better y/y growth rate.

So, Germany  managed to  print some growth despite tensions with Russia and a general gloom. So, is Germany back to the driver seat, and can pull the euro-zone forward as the locomotive of growth? Not exactly.

A 1.2%  annual growth rate is still very slow, and it is likely isolated:  most other members are lagging behind.

Austerity vs. Stimulus

Germany has been called to  set aside its austerity stance and invest to stir the local and the euro-zone economies. These calls came out clearly from international organizations and also more gently from the ECB.

This could come in form of tax cuts or direct investments, but the basic theme is that  monetary policy alone is not a panacea, and action is needed from government. Action is not only structural reforms but also stimulus.

However, such figures could encourage Germany to do the opposite: , this will reinforce Merkel’s current stance of  pursuing a balanced budget next year.

German Chancellor Angela Merkel enjoys high approval in her country and for good reasons:

  • Unemployment is falling: The drop of 22K in the ranks of the jobless is blessed news.
  • Low inflation is good: it is hard to  convince the public that falling prices can turn into a vicious cycle and even harder in Germany, where there is great fear of hyperinflaiton following the Weimar experience.
  • And now, no recession, so everything’s great, if a 1.2% growth rate can be seen as such.

So why should Germany do more? It can continue telling others to become more German and everything will sort itself out.

So all in all, if these  GDP numbers result in less motivation for German stimulus, we could see the euro-zone continuing to struggle.

Unfortunately, it is more likely than not that Germany will be pulled down by its peers rather than the other way  around.

More  opinions:  When push comes to shove, Germany will blink on QE

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.