Subscribe free to our newsletters via your
. Earth Science News .

Walker's World: Germany falters
by Martin Walker
Washington (UPI) Jul 15, 2013

disclaimer: image is for illustration purposes only

Something highly significant is starting to happen in the European economy: The German export machine is slowing, the country's imports are rising and the massive trade imbalances that have been the prime cause of the euro crisis are closing fast.

So far this year, German trade with its eurozone partners has been in balance. Figures released this month from Destatis, the federal statistics office, indicate Germany has bought as much from its partners as it has sold to them.

This is a dramatic turnaround. In 2007 and 2008, Germany was running a trade surplus of more than $130 billion a year with the rest of the eurozone.

Since 2000, Germany built a cumulative trade surplus with the rest of the eurozone worth more than $1.3 trillion. German banks used much of that money to buy Greek, Spanish, Italian and other sovereign bonds, financing the deficits of those countries and thus building up the debts that have lain at the heart of the euro crisis.

Now this "doom loop" is coming to an end. Some of the reasons for that are depressing; the hard-hit economies of southern Europe can no longer afford to import so many German goods. Despite very modest growth in the German economy, estimated at 0.1 percent this quarter, the eurozone as a whole is in recession, contracting for six quarters in a row.

Other aspects of the turnaround are more hopeful. The southern Europeans are exporting again. Spain, for example, will probably enjoy a modest trade surplus this year. From a low of just more than $65 billion in exports in 2009, Spain is on track to export $91 billion worth of goods this year.

This isn't good news for Germany and, since the European economy depends on the health and vigor of its German component, the long-term implications of this turnaround are worrying.

In summing up the latest trade data, it is important to examine each feature in turn. German exports overall are down 4.8 percent from a year ago. The country still enjoys a healthy trade surplus, running at more than $130 billion a year and while it is too soon to identify a clear trend, the combination of slowing growth in emergent markets and reduced demand in the eurozone suggests German exporters will face tough challenges ahead.

German exports to the rest of eurozone, which accounts for 40 percent of total exports, are down 9.6 percent from a year ago. Eurozone demand has shrunk, the inevitable result of the austerity and public spending cuts that Germany has demanded from its eurozone partners. In May of this year, Germany was running a trade deficit with the rest of the Eurozone, exporting $42 billion of goods to them and importing $45 billion of goods from them. These figures are a real surprise.

Germany cannot exert the same leverage on other EU members, like Britain and Sweden, that aren't in the eurozone but while their imports from Germany hadn't declined so fast, they have still shrunk.

So German exports to the European Union as a whole are down 7.1 percent from a year ago. Germany's closest and most traditional markets are no longer feeding Germany's export machine. Overall, German exports in May this year fell at their fastest since the worst months of the global recession in 2009.

German exports outside the European Union are down 1.6 percent from a year ago. This is the ominous news. For most of this recession, Germany had been making up the shortfall in its exports to Europe by exporting much more to China, Russia, Brazil and other emerging markets. But they are slowing appreciably.

Above all, China is slowing is the massive overcapacity China faces in its steel, cement and shipbuilding industries mean that it will be some time before China is again in the market for Germany's advanced machine tools and manufacturing systems.

Without Germany, the rest of Europe is in grim shape. The latest prediction of the International Monetary Fund sees a worse than expected recession this year and very little growth next year.

"The centrifugal forces across the euro area remain serious and are pulling down growth everywhere," the IMF said.

Greece is still missing its targets for privatization of public job cuts. Portugal is in political crisis over the cuts. Italy's debt (Europe's largest) has been downgraded to BBB, which is near-junk status.

And now the German juggernaut is slowing.

This may help ease the euro crisis by ending the previous pattern of massive German trade surpluses with its European partners but it does so at the cost of savage unemployment and bankruptcies. Europe is shrinking its way back into shape.


Related Links
The Economy

Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks DiggDigg RedditReddit GoogleGoogle

Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News

China growth slows to 7.5% in April-June: govt
Beijing (AFP) July 15, 2013
China's gross domestic product expanded 7.5 percent in the April-June quarter, official data showed Monday, a second consecutive slowdown in growth as worries mount over the health of the world's number two economy. While the figure is in line with a median forecast of 10 economists surveyed by AFP, it follows a series of weak numbers pointing to trouble in the Asian giant, with analysts say ... read more

Man who battled Fukushima disaster dies of cancer

Fukushima radioactive groundwater readings rocket

REACTing to a crisis

RESCUE Consortium Demonstrates Technologies for First Responders

Cool it, quick: Rapid cooling leads to stronger alloys

Bioengineers Use Adhesion to Combine Silicones and Organic Materials

NASA's OPALS to Beam Data From Space Via Laser

Experts row over 'earliest' Chinese inscriptions find

Cloud brightening to cool seas can protect coral reefs

Sharks stun sardine prey with tail-slaps

Lionfish expedition: down deep is where the big, scary ones live

Habitat loss doubles coastal flood impact - study

As ice cover disappears, life in the frigid Antarctic moves fast

Antarctic Glacier Calves Iceberg One-Fourth Size of Rhode Island

Russia says evacuation of polar research station to cost $2 million

The contribution of the Greenland ice sheet to sea-level rise will continue to increase

Whole chickens from farmers markets may have more pathogenic bacteria

In US, struggle against snakehead ends on plates

Getting to the Root of the Matter

US farm subsidy policies contribute to worsening obesity trends

Ecuador volcano registers 'strong explosion'

Typhoon kills three, forces evacuation of 500,000 in China

7.3-magnitude quake off Antarctica, no injuries

Almost 6,000 people missing in India floods presumed dead

Madagascar villagers accuse army of mass killings

Guinea jails two for life for attack on president

Kigali says two mortar bombs fired into Rwanda from DRC

Tanzanian charged for smuggling over 1,000 elephant tusks

Genetic evolution seen in peoples living at high altitudes

China island centenarians claim secret of long life

Did Neandertals have language?

How well can you see with your ears? Device offers new alternative to blind people

The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement