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Economy revs up but Merkel still sputters

AFP · 16 Aug 2010, 08:49

Published: 16 Aug 2010 08:49 GMT+02:00

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Germany's gross domestic product (GDP) expanded 2.2 percent in the second quarter, according to data on Friday, the strongest three-monthly gain in output

since East and West Germany reunified in 1990.

This followed figures showing that exports, the backbone of the German economy, rocketed 28.5 percent year-on-year in June to reach €86.5 billion ($111.7 billion), close to pre-crisis levels.

Germany has long been lambasted for doing little to get consumers shopping, but a 31.7-percent leap in imports to a record €72.4 billion suggested that consumer demand is also returning to rude good health.

"Exports are doing so well that they are helping to produce more jobs and more wages in Europe and this in turn is producing more domestic demand," Deutsche Bank senior European economist Gilles Moec told news agency AFP.

Inflation, meanwhile, which has terrified Germans since the harrowing price increases of the inter-war Weimar Republic, remains tame, last hitting an annualised rate of 1.2 percent in July.

The recovery is all the more remarkable considering that the global downturn sparked by the financial crisis in 2008 and 2009 caused Germany's economy to record its sharpest drop in GDP in the post-war era last year.

Thanks in large part to government schemes, a feared spike in unemployment failed to materialise, with the jobless rate now hovering at 7.5 percent as German firms - whose profits are up - begin hiring again.

But the conservative Christian Democrat Merkel is failing to profit, 11 months after winning a second term.

"The Germans see no link between the good performance of the economy and Merkel's government," Gerd Langguth, political scientist at the University of Bonn, told AFP.

An opinion poll last week by the independent Forsa institute gave her three-way coalition of Christian Democrats (CDU), their Bavarian sister party the CSU, and the pro-business Free Democrats (FDP) just 34 percent of voting intentions.

Voters, analysts say, have been turned off by the apparent indecision and very public squabbling of Merkel's coalition - a tie-up she chose - and by Merkel's hesitant handling of the Greek and eurozone crises.

"Voters hate that - they only see indecision," political scientist Jens Walther at the University of Düsseldorf said of the party infighting.

The parlous state of public finances has meant that the coalition is unable to deliver on pre-election promises of tax cuts, choosing instead to slash spending, while progress on reforming health care and education has stumbled.

"For most people, there is no recovery. They are not earning more, but the costs of life are rising," political scientist Barbara Riedmueller from Berlin's Free University told AFP.

Story continues below…

In late September, Merkel is expected to say that the life of some of Germany's nuclear plants will be extended beyond the planned shut-off date of around 2020, in what will be a highly divisive decision.

Environmentalists have promised street protests, and the opposition Greens and the Social Democrats, who pushed through the switch-off while in power in 2000, and who are now riding high in the opinion polls, can't wait.

A disastrous election result in May in North Rhine-Westphalia, Germany's most populous state, robbed Merkel's governing coalition of its majority in the upper house, constricting her ability to pass legislation.

Merkel is facing a "super election year" in 2011 with six of Germany's 16 states going to the polls, three of them in March.

"Mrs. Merkel is going to have a very tough year," Langguth predicted.

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Your comments about this article

20:58 August 16, 2010 by Bishopbayern
She was right all along! The fastest growing economy (and largest!) in europe. Wish we had her in the UK! She has crazy partners but inder german PR she can never govern alone and the greens are just as loopy with the SPD!
21:13 August 16, 2010 by smitherman
The international community is in awe at Merkel's accomplishments with the economy. Yet another economic gold medal performance where other's have stumbled due to lesser leadership, but it seems nothing's ever good enough for the voters.
21:56 August 16, 2010 by Laurence F
Did someone discover that a "little" free market capitalism works?

Imagine how well a totally free capitalistic economy can do; raising the standard of living for all people, increasing their Freedom, and restoring their Liberty.

Maybe, the socialist Obama should stop disputing Merkels's economic acumen.

A job is better then welfare - what a concept!
05:29 August 27, 2010 by Hibernicus
What utter rubbish! It was the "freeing" of capitalism by Clinton in 1999 at the behest of Summers and Geitner, now Obama's top economic advisers that produced the current economic crisis:desperate to get their hands on ¦quot;quick-buck¦quot; financial returns from the use of virtual "funny" money, unrelated to any productive enterprise, and in which all profits returned only to them and their cronies, the Wall St./Treasury Clique persuaded Congress to repeal the long-standing US controls on bank credit with the ¦quot;Financial Services Modernisation Act¦quot; which was signed into law by Clinton on 12.11.1999.

Summers co-ordinated this with Senator Phil Gramm (Texas, and an associate of rogue petroleum company Enron) and thus the legislation was titled the Gramm-Leach-Bliley FSMA. Under its rules, commercial banks, brokerage firms, hedge funds, institutional investors, pension funds and insurance companies could freely invest in each others businesses as well as fully integrate their financial operations. This was the foundation landscape for the growth of the fraudulent financial scams, massive ill-gotten profits, astronomical bonuses for Chief Executives and property market ¦quot;bubble¦quot; which has collapsed into chaos ten years later and brought the world to economic disaster.

In December 2000, just before Clinton left office, Gramm introduced another piece of legislation, the so-called Gramm-Lugar Commodity Futures Modernization Act, which paved the way for the speculative onslaught in primary commodities including oil and food staples.

The criminals of Wall St. should all be in jail but, this is highly unlikely with a majority of Senators and Congressmen still in the pockets of these modern pirates, robbing the American people and the rest of the world of the fruits of their honest labour. There is no such thing as "free market" capitalism; it's all

Monopoly Robber Banks, Monopoly Corporations and Monopoly Media.

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