German Economic Growth Due To Overseas Trade

Official statistics show that the economic growth of Germany in the last three months of 2013 has been driven to a huge extent by overseas trade.

The overall picture is that in the past two years, the performance of the German economy has deteriorated. This marked its slowest expansion since the beginning of the global financial crisis in 2008. According to the statistics, Germany’s GDP in the fourth quarter of 2013 was up with 1.3% compared with the same period in 2012.

A growth by 0.4% is observed in the quarter compared to the third quarter, according to German statistical agency. The main driver behind this increase is foreign trade which accounts for 1.1% points of the overall rise in gross domestic product. However, the figure was hurt with 0.7% by the weak domestic demand. Nevertheless, economic experts express their views that domestic demand will rise now, in the first months of 2014, compared with the end of last year. The reason for this expectation is that the high levels of job security, together with rising incomes will enhance consumer assurance. Also, very low inflation rates will further influence the expected stronger household spending growth in 2014. The government is forecasting a growth of 1.7%

Furthermore, the statistics show that the key economic mechanism in that specific period was the balance of export and imports.

The central German bank, Bundesbank, has stated that German economy is in good shape because of the low unemployment rate and wage growth which has reached normal levels again. Also, low interest rates had been boosting house building and private consumption in Germany, even though trade had been weakening.

Another factor which will assist German economy is other improvements that have been happening in the rest of the Eurozone and the US which are both big export markets. Thus, Germany might be able to outperform the rest of the Eurozone for the next coming years. It is important to note that despite some of these negative statistics, Germany’s economy continues to be a strong point of the Eurozone and has credit for the help it provided in the pulling the single currency bloc out of recession last year.

EUROZONE SLOWS TO A SNAIL’S PACE

The Eurozone economy has posted appalling growth figures for the months July to September with a growth of just 0.1% which is a decrease of 0.2% from the previous three months to that. This poor figures has marked only the second month which the Eurozone has posted a positive number, prior to which was an 18 month long recession which saw trade in the euro are contract month on month. The figure as well as showing further negativity, reveals the sensitivity of the recovery as well as the length of time it will take for the economic trade block to fully recover.

The European economy as a whole is taking a lot longer that expected to bounce back from the financial crisis in comparison to the other regions which suffered from the crash of 2008. With the Euro area having debt problems which bare similarities to those of the United Kingdom and the United States of America, for many of the Member States the debt level has a more political importance than its financial meaning.

Those less powerful members of the trade block have been bailed on unfavourable terms with conditions which lead to government cuts in spending with the overall objective to reduce the country’s debts. The implementation of such money saving policies have adversely affected voters who have been the victims of reduction in wages, an increase in taxes as well as job-cuts and changes to the provision of public services. The economic prospects for the Eurozone appear negative for the near future according to several economists who with high unemployment and a decrease in overall living standards cannot see now the economy can be driven to progression.

Nevertheless, a somewhat optimistic projection has been made for next year by the European Commission who predict at 1.1% growth and a progression of 1.7% in 2015. The US who are alike dealing with major government debt issues are however better at handling the economy with a growth rate for this year so far being 2.8% in comparison to the dismal 0.4% figure of the Eurozone.

No positives can be found either within Europe’s strongest and most influential countries, that of France and Germany. The growth of the German economy in the third quarter was down from 0.7% in the previous to 0.3% whereas France displayed a yet disappointing -0.1% which is identical to the third most important member state’s economy, that of Italy.

 

Europeans Fight Against Debt Crisis

Government officials throughout Europe are trying to find a way to reverse the debt crisis. They have imposed deep budget cuts for a couple of years now. These austerity measures have had serious implications for citizens throughout the continent. Citizens throughout Europe are speaking out against austerity and hope governments will focus on improving economic conditions for the lower and middleclass.

State of the Eurozone Economy

According to Joseph Stiglitz, an economics professor from Columbia University, most of the Eurozone is suffering a deep depression. Policy makers are reluctant to use that word, but the people of Europe know how bad conditions are. Economists believe that the austerity measures are only making matters worse. Stiglitz warns that Europe will need a decade to recover from the damage caused by these budget cuts.

Most economists agree that the Eurozone needs some structural changes. However, they said that policymakers are focusing too heavily on reforms within the individual countries. They said that they are going to need to focus on fixing the framework of the euro itself.

Citizens have thrown austerity strikes over the last year. They are calling for their leaders to stand up to the ECB and the European Commission leaders demanding austerity. Pier Luigi Bersani is pledging to stand by their request. He recently said that Italy must “leave the austerity cage.”

Nevertheless, politicians like Bersani don’t appear to have enough political clout to convince other lawmakers to reverse austerity measures. Austerity will probably remain a reality until enough people support Bersani and other lawmakers who share his views.

Will Austerity Work?

Some experts speculate that the citizens of Europe will refuse to tolerate austerity in the very near future. They may side with Bersani and other leaders who promise to stand up against the budget cuts. Politicians may feel pressured to give into their demands and increase spending.

However, austerity could fail even if leaders don’t back down on their budget cuts. Revenues may continue to shrink in the coming months, which would make it more difficult for individual states to meet their debt obligations.

Some experts have called for alternate solutions, but feel that the government doesn’t want to consider them. Stiglitz said that Germany won’t even consider any of the sound ideas that many economists have proposed. He said that Germany seems adamant about protecting the sanctity of the single currency, even though Europe is struggling to survive. Mario Draghi, the president of the European Central Bank, agrees with his sentiments. The Guardian recently quoted Draghi stating that the ECB will do whatever it takes to save the euro.

Tensions rise over Cyprus’ financial crisis

The Cypriot Parliament has been advised by the European Union and high profile bankers to raise the required 5.8 billion euros in order to be eligible for a bailout.

News of negotiations over attempts to raise the money have been confirmed by Christos Stylianides, a government spokesperson who said that there were “hard negotiations with the troika”; the troika being the EU, International Monetary Fund and the European Central Bank.

Cyprus’ Government have been facing a large amount of public pressure on the matter with protests occurring outside Parliament. Michael Sarris, the Cypriot Finance Minister had tried to obtain financial support from Russia on his trip to Moscow but failed. An alternative method of raising the funds needed was suggested which would mean the use of pension funds in order to save the country’s banks, however this has been met with strong opposition from Germany’s leader Ms Merkel.

Andreas Artemis, the Bank of Cyprus’ chairman commented, “ It should be understood by everyone… especially from the 56 members of parliament… there should not be any further delay in the adoption of the eurogroup proposal to impose a levy on deposits more than 100,000 [euros] to save our banking system.”

In response to this businesses within Cyprus have now started to decline card and cheques in favour of cash due to the uncertainty around the government’s decision on how to deal with the crisis.

There have been calls from within the Eurozone for Cyprus to reform its banking system which is currently too dependent on foreign investments. The crisis has caused foreign investors to be wary of investing money in Cyprus for fear of losing what they put in. Anton Siluanov, Russia’s Finance Minister said that there was little interest in the offshore gas reserves of Cyprus.