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ECONOMY

Jealous of an unsatisfied Germany

Success breeds resentment – so it's little wonder other countries including the United States are jealous of Germany's booming economy. But even Germans don't seem to like it when things are going well, says Malte Lehming from Der Tagesspiegel.

Jealous of an unsatisfied Germany
Photo: DPA

American track athletes dominate the 400 metre race. They’ve won Olympic gold in that discipline 19 times, and have stood atop the winner’s podium since 1984. That sticks in the craw of the global competition, which is why a new proposal has been submitted to the International Olympic Committee. In the future, all US 400-metre runners must carry a five-kilo backpack. This would level the playing field for the competition.

As silly as that sounds, the US government is making a similar argument about the German economy these days. Well-crafted German products are in demand all over the world, and this is driving growth. At the same time, unemployment is sinking to ever-lower levels, the national debt is relatively low by OECD and EU standards, and the country’s DAX stock index is on the rise.

But rather than welcome the success of his European partner, US Treasury Secretary Timothy Geithner has suggested that Germany’s trade surplus be capped: in other words, that exports be banned if they go above a certain level. He is supported by voices from EU headquarters in Brussels and Germany’s socialist Left party. This is an odd coalition of free trade opponents, but they are united by one thing: envy.

US President Barack Obama adopted his finance minister’s proposal ahead of the G20 in Seoul, South Korea last week, but fortunately Chancellor Angela Merkel resisted his pressuring. After all, she is in a strong position: the Americans are criticizing Germany for what it is apparently doing right.

While the economies of countries like the US, Britain, France, Spain or Greece are still struggling or facing drastic austerity measures and angry street protests, Germany has weathered the global financial and economic crises well. There is no sense of a divided society here.

It’s all due to a convergence of contributing factors: the delayed effect of former Chancellor Gerhard Schröder’s labour market and welfare reforms known as the Agenda 2010, wage restraint by trade unions, the ‘cash-for-clunkers’ car purchase scheme, a relatively moderate stimulus plan, and propping up the eurozone by involving the International Monetary Fund. More than once, Merkel was criticized for any and all of these measures. But at the end of the day, she was always proved right.

Success breeds resentment, and it’s no surprise that German opposition parties and certain nations are grinding their teeth, because the German example puts pressure on their leaders to explain themselves. But why are Germans themselves not more proud of the achievements they have helped produce?

Even as their country has escaped the maelstrom of the crisis – and with an even healthier job market than before – Germans are lost in raging debates about disillusionment with politics and democracy, deep social insecurity and other supposed anxieties of the zeitgeist.

The country’s mood is fundamentally anti-cyclical. But we already know that from other concerns. While life expectancy rises every year, so does anxiety about chemicals in food, healthy diets and fitness. Will Germans ever be relaxed and satisfied? Apparently that’s the last thing we’d want.

This commentary was published with the kind permission of Berlin newspaper Der Tagesspiegel, where it originally appeared in German. Translation by The Local.

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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