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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

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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