The “Mirage” of the Strong German Economy

Steven Petrov                                                                                                                                                                                                                                                     The Paw Print

“The country’s leaders should focus on the embracing the manufacturing and investments, thinks the economist”

-Philippe Legrain

For more than 60 years the German politicians have consistently tried to establish the appearance of more “euro-looking” Germany. The current administration of Angela Merkel, however, wants to shape the European economies into a German model. This is politically unreasonable and economically dangerous. The German economy is far from the most successful one, as the country’s Minister of Finance describes it. One of the main arguments of the former economical advisor of the European’s commission president, Philippe Legrain, is that it is unproductive and doesn’t function in the right way.

Germany does have its strong economical sides like world widely famous companies, low unemployment rate, and excellent credit rating. However, the problems it faces are much more and must be addressed and analyzed properly before offering the German economical model as the right way to go. Germany’s main economical problems deal with payment delays, bankruptcy, insufficient investments, low increase in production capacity, and “dark” demographic perspective. This economic model is from the “for other’s cost” type, suppressing the salaries in order to support the export, and should not serve as an example model for the rest of Europe. Germany’s economy has shrunk with 0.2% during the 2^nd quarter of 2014, after growing on an average and relatively low rate of 3.6% ever since the 2008-2009 crises. Germany has slightly outperformed England and France since the financial crisis 6 years ago, but the 3.6% rate is less than half of the expansion and growth that Sweden, Switzerland and USA have had. The annual increase in GDP of Germany is also not impressive, standing at average of 1.1%. This places Germany on the 13^th place among the 18 countries that are part of the Euro zone.

After being doomed as “Europe’s sick man” in 1999, when the Euro was introduced as a currency, Germany responded not with an increase in the dynamics but rather with a significant reduction in expenses. The investment numbers in the country have fell with more than 5% of the country’s GDP in the last 13 years. In the year 2000, investments represented 22.3% of Germany’s GDP, whereas today they stand on less than 17%. The country’s infrastructure like roads, highways, bridges, tunnels etc. has slowly started to fall apart due to an inadequate maintenance throughout the years. The educational system is also facing some major challenges, where now the percentage number of college graduates is lower even than Greece (29% vs. 34%).