Se siguen enfriando las
expectativas de crecimiento… Mira las últimas:
Y los bonos alemanes cotizan al
0%. Inviertes en un bono a 10 años y sacas de rendimiento un magnífico 0%...
Until recently,
Germany has been the seemingly unbreakable workhorse that has pulled the
European economy back from the brink and kept it ticking along through a myriad
of internal and external pressures, as well as political crises, over the last decade. As
the undeniable leader of the bloc, the country has spearheaded and supported
rescue plans for the Eurozone’s weaker links, as well as a number of
controversial policies that work towards further centralization within the
EU. However, with
clouds now gathering over Germany’s economic outlook, concerns over potential
knock-on effects on the entire monetary union are on the rise.
Falling Below Expectations
Trade tensions, the threat of a hard
Brexit and weaker emerging markets growth have all played a part in dampening
Germany’s nine-year-long economic upswing. 2018 was a trying year for the
world’s third-largest exporter, as Germany saw its much-celebrated trade
surplus shrink. With imports growing faster than exports, the impact of the
trade disputes between the US and both China and the European Union has been
widely felt by industry leaders.
Recently released figures also cast large
shadows over Germany’s formidable manufacturing sector, with industrial output
much lower than expected. In November, industrial output fell by 1.9%, while the
year-on-year decline was 4.7%. These figures, the worst since the end of the
2008 crisis, are understandably giving rise to fears among investors and
analysts of a nearing recession.
Furthermore, the new year is unlikely to
bring a reversal of fortunes for the German economy, as it is now forecast to
expand at a rate below 1.5%, an estimate downwardly revised since March. At the same time, the sentiment on
the ground by industry leaders and investors is shifting from caution and
hesitation to outright pessimism for what lies ahead. According to a recent
survey by the BVMW industry association, 53% of small and medium-sized
companies in Germany believe that the country will slip into a recession in the
next year.
Aggravating Factors
The projected economic slowdown can have
severe consequences in and of itself, however, the situation is bound to become
even more dire thanks to a number of external and internal developments
compounding the pressures. For
one thing, as the European Central Bank (ECB) endeavors to normalize and
tighten its monetary direction, the extremely accommodative environment that
markets and companies have been operating under in recent years will become a
distant memory.
Internal forces also help stack the odds
against the German economy, with the country’s labor market being one of the
key problems. The increasingly grave shortage of skilled workers that employers
have been facing is presenting massive obstacles to their growth and has been
detrimental to their operations. On average, it takes 100 days for a company to
fill a vacancy, with the hardest hit sectors being the tech industry,
construction and healthcare. As a new report by the economic research institute
Prognos shows, the problem is only set to get worse. The report predicts a
shortage of about 3 million skilled workers by 2030, projected to rise to 3.3
million by 2040. Germany’s demographics, specifically its low birth rates, are
chiefly to be blamed for this mismatch, as the next generation of workers does
not suffice to replace the working population that is now shifting to
retirement. The migration wave that began in 2015, despite predictions to the
contrary, has also failed to fill that gap, as integration into the labor force
has largely failed and most candidates lack the language and technical skills
required to fill the vacancies.
To a large extent, the labor shortages are
a-self-inflicted wound for Germany, much like the problems in the
long-suffering service sector. Over-regulation,
extensive interventions and the inevitable inefficiencies of a centrally
planned economy are creating significant hurdles that hold back growth and
overall competitiveness. Overly restrictive, state-imposed
requirements for access to various professions dramatically shrink the pool of
eligible candidates, making it even harder for employers to fill their
vacancies. On top of that, exorbitantly high employer costs for social security
and other taxes, as well as harsh restrictions on employee termination
conditions, place a heavy burden on companies, especially those trying to
compete internationally. In other words, demographics might contribute to the
present challenges, but their detrimental role is largely amplified by existing
systemic inefficiencies and market restrictions.
Last but not least, it is the profile of
the German economy itself that is problematic and makes it likely that the
county will struggle to continue to compete in the future as is has done thus
far. Despite the
blue-sky rhetoric and forward-leaning proposals we regularly hear from the
German government and its representatives, most ideas have not crossed over
from theory into practice. The country has failed to take advantage of its
booming years to improve the competitiveness of its service sector, to
modernize and digitalize key aspects of its industrial sector, to press forward
on tax reform or to enforce any meaningful measures to prop up its pensions
that are close to breaking point. In other words, having missed the opportunity
to prepare and to plan ahead while it still could, it might prove very
difficult for Germany to respond to the next economic downturn lurking around
the corner.
Domino Effect
Germany’s role as the locomotive and
economic leader of the entire bloc has been crucial for the last decade and the
timing couldn’t have been worse for the cracks to start showing in Europe’s
largest economy. The
Eurozone as a whole is already facing strong headwinds, with growth estimates
dropping to new lows. According to a recent survey of economists by Consensus
Economics, GDP growth for 2019 is projected just below 1.6%, or 0.4% lower than
the previous, more optimistic forecast in March. That would be the second
consecutive annual decline, with the growth figures for 2018 expected to come
in at 1.9%, far below the robust 2.4% recorded in 2017.
Peripheral pressures, both economic and
political, also abound. France, once a reliable political ally to Germany and a
strong economic presence in the Union, is severely weakened by domestic unrest
and public loss of faith in the government, while its private sector has
slipped into a contraction for the first time since 2016. Austria, also a
former supporter of German initiatives in the EU has long shifted to a more
critical stance, fiercely opposing migration proposals led by Germany and
instead siding with Hungary, Poland, and other like-minded member-states. In
the meantime, the prospect of a “no-deal” Brexit, once unthinkable for
Brussels, is slowly coming into focus, as are its economic implications for the
bloc.
In the backdrop of the social and
political tensions that have been brewing across the continent for over two
years, the European Parliament elections set to take place in May this year are
also giving rise to fears of a Eurosceptic “comeback”. Deep divisions and a
chronic lack of open dialogue have significantly weakened social cohesion in
Europe, muffling the voice of the individual and shifting power over to group
structures and cultivating collective identities. Debates over vital political
and economic issues have largely been reduced to simplistic, populist and
crowd-pleasing grandstanding, as the public’s interest in politics and trust in
politicians has plummeted. The recently erupted, “Yellow Vest” (link to
previous article)inspired protests that started in France but spread throughout
the continent, provide strong signs of this public discontent with the status
quo.
Overall, it would appear that Germany acts
as the string that keeps the bloc together and should it break, multiple
challenges could surface, threatening the future of the Eurozone and the
cohesion of the EU. As a result of the growing political frictions and the
projected economic slowdown, the outlook for European markets and for the Euro
is far from encouraging.
Abrazos,
PD1: En el alma de cada
cristiano, Jesús ha sembrado, por el Bautismo, la gracia, la santidad, la
Verdad... Hemos de hacer crecer esta semilla para que fructifique en multitud
de buenas obras: de servicio y caridad, de amabilidad y generosidad, de
sacrificio para cumplir bien nuestro deber de cada instante y para hacer
felices a los que nos rodean, de oración constante, de perdón y comprensión, de
esfuerzo por conseguir crecer en virtudes, de alegría...
