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ECONOMY

Exporters: We don’t need the euro

German exporters, the backbone of the biggest eurozone economy, could manage without the common euro currency, the head of their BGA industry federation, Anton Börner, said on Wednesday.

Exporters: We don't need the euro
Photo: DPA

“What is important for us is the free market, we do not necessarily need a common currency,” he told the foreign press association in Berlin. “Is there life for Germany after the euro? Yes there is.” Exporters “can live without the euro,” he added.

Börner was speaking one day after official data showed that record exports had pushed Germany’s trade surplus to a three-year high in September, indicating the country was bearing up fairly well in the eurozone debt crisis.

Germany, the world’s number two exporter after China, exported goods worth a total €91.3 billion ($124.9 billion) in September, 0.9 percent more than in August and the highest level since unification.

The BGA represents Germany’s exporters, mainly small- and medium-sized firms. Börner said that for those companies, “the amount exported to eurozone countries does not depend on the euro itself but on the free market and the absence of customs duties.”

Börner’s remarks stood in stark contrast to the line taken by German Chancellor Angela Merkel and other political leaders, who argue that “everything must be done” to protect the eurozone from falling apart.

Consultancy group McKinsey said in a recent study that two-thirds of the economic growth in Germany in the last decade could be put down to the introduction of the euro.

“An Italy which fails in the euro is just as disastrous as an Italy that fails outside of the euro,” Börner said, voicing scepticism at Rome’s ability to implement needed economic and fiscal reforms.

France also faces “a big problem of growth and productivity,” he added.

But he said that while the end of the euro would certainly pose a competitiveness problem for German companies, “with a reasonable monetary policy, and by agreeing with the unions,” they could be overcome.

“A good entrepreneur must think of a Plan B,” Börner said, stressing he did not want to see an end to the single currency.

But, if the euro did fail, Germany would probably join a bloc of other northern European countries with similar economic profiles such as Austria, Finland, the Netherlands and Denmark, he said.

AFP/mdm

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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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