Jens Bastian
As the German economic situation continues to improve, well into the second year of an impressive recovery, the drivers of the country's economic growth are manifold and suggest sustainability over time. As the German economy motors forward, registering an unprecedented 6.1 percent first quarter 2011 gross domestic product (GDP) performance, the positive spillover effects on overall employment levels and declining unemployment are following suit.
Moreover, on the back of such economic performance both the IMF and the
To what degree that growth delivers short- to medium-term benefits for the rest of
This widening gap is further illustrated in the dynamics of unit labour costs between
Its economic consequences have yet to ascertain themselves, but the political implications are becoming more obvious as the sovereign debt crisis continues to impact any recovery process on the continent. Most importantly, there is a declining crisis perception in
Two years after registering negative GDP growth in excess of five percent, the German economic revival is first and foremost the result of, but not anymore exclusively dependent on, the country's traditional export-led growth agenda. More specifically,
According to the country's Federal Statistical Office, in
This changing dynamic has taken place since early 2010, when the export-led recovery of
As German unemployment continues to fall during the first half of 2011, more and more companies from the public and private sectors are announcing their intentions to hire personnel. To illustrate, in early July Deutsche Bahn, the publically-owned railway company, tabled plans to increase employment levels by 5,000 to 7,000 new hirings in the coming years. What is striking in this approach is the fact that ever more German companies are seeking to take new personnel on board at all levels of expertise.
Unemployment has now contracted for 24 consecutive months. In
Put otherwise, the emerging economic performance has yet to translate into rising wage agreements in collective bargaining. Most of these agreements are multi-year contracts and will only be renegotiated in 2012. While trade unions have already started to articulate a more assertive wage bargaining position, the devil remains in the detail since an ever-growing number of workers and employees in the private sector are not covered anymore by collective framework settlements, particularly in the eastern states of
However, we also have to take into consideration that what some, in their exuberance, are starting to term the next 'German economic miracle', are also the favorable and delayed spillover effects from a major reform initiative that started in 2003. More specifically, Chancellor
Ever since taking office in
Elected on a platform of tax reductions and simplifications, the Merkel government has repeatedly struggled to honour this pledge. Moreover, since taking office almost two years ago, considerable differences of opinion have frequently surfaced between the finance minister Wolfgan Schäuble (
But as opinion polls underline, the overriding majority of German citizens are opposed to tax cuts, even if they are presented as sweeteners to voters ahead of the next planned federal elections, which are due in
The survey found that seventy percent of respondents emphasize the greater importance of reducing government borrowing, bringing down federal, regional and municipal debt levels. This perspective is further supported by business and industry leaders who argue that it would be wrong to cut taxes, while 78 percent said that it is unrealistic to expect tax cuts in 2011.
A key factor determining the sustainability of
After receiving cross party support in parliament from all but one opposition party, the coalition government of Chancellor Merkel adopted the ambitious plan to close all of its operating 17 nuclear power plants by 2022. They are to be gradually replaced with renewable energy and gas-fired power stations. This decision comprehensively reverses an initial controversial decision taken by the federal government in 2010 to prolong
How retooling the country's energy supply will be financed will be of critical importance for the real economy and the support level achievable from? industry representatives in
Finally, as many observers have noted over the course of the past 18 months,
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