The Editors (2014) “What’s Bad for Germany Could Be Good for Europe“, Bloomberg View, 04 November.
Even those familiar with Europe’s plight will find the latest economic forecasts grim reading. You thought the outlook for the euro area was bad already. It’s getting worse, says the European Commission.
That said, Europe works in mysterious ways. In this deepening pessimism, there might just be grounds for optimism. The projections make plain the true character of Europe’s economic malaise. It’s no longer (if it ever was) a question of a debt-burdened periphery dragging down an otherwise healthy core of modern, well-run economies. The forecasts confirm that the rot has spread not just to the core but also to the core of the core: Germany. Europe’s largest economy now has more incentive than ever to help revive the larger European economy.
Germany’s economy has been slowing for a while, but the new forecasts are still pretty shocking. In May, the commission predicted growth in German gross domestic product of just 2 percent next year. This has been halved, to a little more than 1 percent — the same dismal rate that the forecasters now expect for the euro area as a whole. Underlining the point, as the center of Europe deteriorates, growth in the U.S. and the U.K. continues to improve.
Relevant posts:
- Mitchell, B. (2014) “The German experiment has failed“, Mainly Macro Blog, 07 October.
- The European Magazine: Conversations, Interview with Philippe Legrain, “Germany is undermining future growth”, 20 September 2014.
- Daveri, F. (2014) “The German surplus and the Eurosceptics“, VoxEU Organisation, 28 May.