Germany: Europe’s lopsided powerhouse

Stockmarket volatility in Germany is a reflection of the underlying fragility of the country’s economy.


Stockmarket volatility in Germany is a reflection of the "underlying fragility of the country's economy", says Handelsblatt. The risks posed by Italy's eurosceptic government and its fragile banks, rising US interest rates and the "dysfunction" in Germany's governing coalition have cast doubt on the country's reputation as Europe's economic powerhouse.

Parties from Germany's ruling coalition suffered significant losses in Bavaria's state election, raising questions as to "whether Chancellor Angela Merkel's government will last", says Piotr Skolimowski on Bloomberg. Economic growth expectations are being reined in amid fears of the consequences of a hard Brexit, which looks "ever more likely".

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Germany's economy might have a "suspect engine,"says Roger Bootle in The Daily Telegraph. Since the adoption of the euro in 1999, GDP there has grown by 32%, while in the UK it has increased by 43%. But in that same period spending by German consumers has only risen by 20%. What explains this discrepancy between GDP and consumption? T

he explanation for relatively weak consumption is not down to Germans' "legendary" saving habits, but the fact that German workers "have not been paid that much". Since 1999, the average real pay of German workers has risen by 23%, or 1.2% a year. Meanwhile, German companies have done spectacularly well, thanks to strong exports of their goods and services that make up 47.2% of GDP.

Advertisement - Article continues below

As a result, the German economy is completely "lopsided", with excessive reliance on exports and domestic demand too weak, as Bootle points out. Throw in worries over low investment in infrastructure and education, and you can see why investors are having doubts.




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
EU Economy

Investors needn’t fear the rise of Europe’s green parties

Green parties across Europe are finding the centre-right to be natural allies. That will be great for business, says Matthew Lynn.
12 Jan 2020

Sweden ditches negative interest rates

Sweden has ended its experiment with negative interest rates. The Sveriges Riksbank, the world’s oldest central bank, has raised the main interest rat…
26 Dec 2019

What's behind the great French pensions revolt?

Workers in France are on strike and taking to the streets to protest against President Macron’s reforms. We’ve seen this play before – but this time t…
21 Dec 2019

Most Popular


Money Minute Friday 17 January: UK weakness likely to continue

Today's Money Minute previews UK retail sales figures the UK, inflation data from Europe and industrial production from the US.
17 Jan 2020
House prices

UK house prices may be heading for a Boris bounce

The latest survey of estate agents and surveyors from the Royal Institution of Chartered Surveyors is "unambiguously positive" – suggesting house pric…
16 Jan 2020

Currency Corner: how high can the pound go against the euro in 2020?

In the month in which we should finally leave the European Union, Dominic Frisby takes a look at the pound vs the euro and asks just how high sterling…
13 Jan 2020
Share tips

Class acts going cheap: buy into Europe’s best bargains

Value investing appears to be making a comeback, while shares on this side of the Atlantic are more appealing on metrics such as price/earnings ratios…
16 Jan 2020