Germany Moves Full Speed Ahead

From the June 2007 Trumpet Print Edition

German business is booming, investor confidence is climbing, and productivity is up—all good signs for Germany’s economy. “Germany has finally found its role again as the motor for growth in the eurozone,” said German Chancellor Angela Merkel during an opening speech at a technology fair in Hanover.

Exports, along with corporate investment and increased global demand for German-engineered products, are responsible for this sudden economic rise. The world’s largest exporter experienced a 2.7 percent growth in gross domestic product in 2006—its highest in six years—and higher than the average growth in the eurozone. Exports grew 12.5 percent in 2006; the nation shipped almost 25 percent more goods to Russia and China alone.

Germany’s export business is driven largely by its global niche products—highly sophisticated technological tools that enjoy booming worldwide demand. Businesses that offer these specialized products don’t compete with nations such as China, which produces many less-sophisticated goods at much cheaper costs than its Western counterparts can. The demand for these higher-end products is growing, even though the goods have become more expensive as the euro increases in value.

The European Union’s success as a dominant global superstate that can compete with the United States hinges on Europe becoming less dependent upon the U.S. economy and more competitive in the world economy. Germany, the engine of the European economy, is proving itself to be just that.

Its unemployment rate, for instance, is in the single digits for the first time since 2002. “The simple fact that the German labor market is turning … shows that this is a genuine German renaissance, one that is independent of the U.S.,” said Nicolas Sobczak, senior European economist at Goldman Sachs in Paris (International Herald Tribune, April 11).

Germany now exports more to the nations of the former Soviet Union than it does to the U.S. It ships five times more goods to nations within Europe than to the U.S.

Already other EU nations are benefiting from Germany’s booming economy. In 2006, Germany’s exports to Poland rose 29 percent while imports from Poland rose 23 percent. Other countries in Europe need an economy like Germany’s to fuel their own growth.

Germany is still modestly dependent on the U.S. economy. If America’s economy takes a turn for the worse, which we expect it to do, Germany will still have to endure the effects. However, its success in turning a stagnant economy into the world’s third-largest provides a hint of its likely resiliency in case of an American collapse, and all the more quickly as it becomes less dependent on it.

For more on how Germany’s revived economy will affect the entire world, request our free full-color booklet Germany and the Holy Roman Empire.