Being rich will not make the German economy encounter a "perfect storm"

Germany, the fourth largest economy in the world and Europe, is experiencing what economic analysts call a "perfect storm".

"Perfect storm" is a common word in financial markets. People will compare some potential economic crises with the 199 1 year, when the American weather system failed to forecast in time, which triggered a rainstorm in the northeast of the United States.

According to Bloomberg Businessweek 1018 October, the German economy is highly sensitive to global economic fluctuations. After almost uninterrupted expansion in 10, the German economy is on the verge of recession.

Since the second half of 20 18, the German economy has been shrinking, and this situation has not been reversed in 20 19. According to the data released by the German Federal Statistical Office, Germany's GDP decreased by 0. 1% in the second quarter of 20 19. This is another contraction of the German economy after a recession of 0. 1% in the third quarter of 20 18 and zero growth in the fourth quarter. The report released on September 1 1 by the Kiel Institute for World Economics and the Leibniz Institute for Economic Research in Germany shows that the German economy is likely to shrink again in the third quarter.

In this way, Germany seems to have entered a technical recession.

The manufacturing industry suffered a serious setback.

In the case of the economic downturn in Germany, the performance of manufacturing industry is particularly bleak. Germany's purchasing managers' index (PMI) in September hit its worst performance since the 2008 financial crisis and has been below the threshold for nine consecutive months.

According to German Economic Weekly, the monthly survey of more than 800 companies by IHS Market, a British international consultancy, showed that the PMI of Germany unexpectedly dropped by 2. 1.4 1.4 in September, which was lower than the index expected by economists interviewed by Reuters. The index only means economic expansion when it is higher than 50.

In terms of internal economy, the automobile industry, as the core of German manufacturing industry, is in jeopardy. Because of cheating in diesel emissions, the German automobile industry was criticized by the whole world, which subsequently led to the scandal of the five major automobile companies suspected of monopoly. This country, which has always been regarded as the trend of the world's leading industries, has been vacillating in its path selection, and it seems weak in coping with the challenges of pure electric vehicles, leaving the United States represented by Tesla behind. Coupled with the leading position of technology companies from Silicon Valley in driverless and artificial intelligence, the traditional German automobile industry has been greatly impacted.

Daimler Benz, headquartered in Stuttgart, recently announced a loss of 65.438+0.6 billion euros in the second quarter of this year, compared with a profit of 2.6 billion euros in the same period last year. The news shocked the automobile manufacturing industry. In addition, affected by the trade tension and climate crisis, Frankfurt Motor Show, as one of the largest auto shows in the world, ushered in the "coldest" session since its establishment this year.

Externally, the export-oriented German manufacturing industry is greatly influenced by the external and international unstable economic situation. As the risk of Britain's no-agreement Brexit increases and trade friction intensifies, the economic prospect of Germany, which relies on exports, is still full of uncertainty. At the same time, the Trump administration announced that it would impose new tariffs on billions of dollars of EU products from 10 to 18, which brought greater instability to Germany's export business.

Eric Schweitz, president of the German Chamber of Commerce and Industry, said that in the first half of 200019, German exports showed zero growth, which was significantly lower than that in the same period of 200018 (an increase of 4%), and the trade surplus decreased1300 million euros.

The "Business Climate Index" released by the famous German think tank Yves Institute of Economics every month is considered as a "barometer" of the German economy. Since 20 19, the index has been lower than the dividing line of optimism and pessimism 100, and it shows a downward trend month by month, and it has dropped to 95.7 in July. In addition, the "economic prosperity index" published by Leibniz Economic Research Institute has also dropped to the lowest level since 20 12 years, indicating that the prospects are getting worse and worse, and people's pessimism is higher.

Faced with difficulties at home and abroad, five leading research institutions in Germany drastically lowered their economic growth expectations. They predict that the German economy will grow by 0.5% this year and 1. 1% in 2020. In contrast, their forecasts for these two indicators in April were 0.8% and 1.8% respectively.

"Black Zero" Policy Dispute

Chancellor Angela Merkel acknowledged that the German economy was in a "difficult period", and Minister of Economy Altmeier believed that correct measures must be taken to turn the situation around.

As for how to boost the economy, all parties call on the government led by German Chancellor Angela Merkel to abandon the fiscal policy that has always adhered to the principle of avoiding large-scale fiscal expenditure-commonly known as "black zero", with the goal of balancing international payments.

In 20 14, Wolfgang Schuble, then German Finance Minister, completed a miracle in the contemporary economic history of Germany: after experiencing the "economic miracle" of 1969, German finance recovered its balance of payments, commonly known as "black zero". Since 20 14, thanks to the unusually long growth cycle, record high employment rate and strong tax revenue, the Merkel government has maintained the guarantee of public expenditure without increasing new debts.

Recently, however, in the face of the danger of economic downturn, the criticism of the German government for "having money but not spending it" is increasing day by day. At present, the yield of German 10-year government bonds has fallen to nearly -0.65%, and the cost of government borrowing has dropped significantly. In August, the German Industry Association (BDI) began to call on the federal government to "abandon" the strict fiscal policy as soon as possible. Joachim Langer, the general manager of the association, believes that Germany once had the conditions to do so because "the German economy has performed strongly in the past decade, with high employment rate and healthy public finances", but now, under the economic downturn, this policy must be re-examined. Germany must now formulate a new fiscal policy.

Achim Lang, managing director of BDI Industry Alliance, said, "The decision to stick to the' black zero' budget policy next year must not become dogma," he added. "In the face of current economic challenges, old ideas will have no effect."

Although most domestic economists and the European Central Bank want the German authorities to open their wallets, balance the trade surplus, increase public expenditure and prevent the economy from falling into recession, it seems that the German authorities are not prepared to implement a large-scale economic stimulus plan at present.

According to DPA, German Economy Minister Peter Altmeier said that there is no serious economic recession in Germany and there is no economic crisis at present, so there is no need to abandon the "black zero" budget policy to avoid increasing new debts (the federal budget has reached a completely balanced state). "I stand by my position that discussing' black zero' now is arguing about the wrong topic at the wrong time," Altmeier said.

German Chancellor Angela Merkel's center-right party also vowed to adhere to the policy of balancing the budget and not increasing new debts, despite the increasing pressure on government borrowing and investment at home and abroad.

Germany's obsession with balanced fiscal policy has a profound historical origin. After the two world wars, in order to solve the debt problem, Germany issued a legal clause prohibiting large amounts of borrowing, emphasizing that the amount of borrowing should not exceed "long-term and generally promoting growth investment" in principle. After the debt crisis broke out in many countries in Europe and America in 2008, in the Basic Law, Germany once again stipulated the debt restrictions on the Federation and the federal states.

6543810.2, German Finance Minister Scholz said that as the largest economy in Europe, Germany will be able to cope with the economic crisis. He added that the economic downturn is not expected to be as severe as in 2008 and 2009, and the government will help enterprises tide over the difficulties by reducing taxes and paying contributions to the social security system.

This article is from Time Weekly.

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