Tuesday, 14 August 2012

Is Germany a bull in the Eurozone's China Store?


Some thoughts of mine on PressEurop's very interesting report: Berlin still selling too much (14/8/2012)

1) The FAZ comments IMO, at best, show (let's call it) "non-systemic thinking".

2) Is Germany exporting too much or importing and in general consuming too little? Too little from the Eurozone?

3) In terms of trade surplus, Germany is a bull in a China Store. Funny thing is, Germany's inflation phobia makes China another bull in the Eurozone and EU's "stores"/mkts for goods.

4) Germany saves "a lot" which means it has to find outlets for its investments. No wonder Germany had invested "a lot" in the PIIGS (while selling "a lot" to them too). The rest is not "rocket science"!

5) But the strategic/systemic question is: Is Germany too big to be part of the EU/EZ but too small to be a power on its own? And if Germany is too small to be a world power on its own, what do that say for eg UK's ambitions? France, sometimes arrogant, nevertheless knows it needs "Europe". UK and Germany (and others) act as if they do not.

6) Marketing: What exactly is Germany exporting that the Eurozone (40%), EU (60%), the world, a) cannot substitute or b) always need/want?

7) So with Germany having cornered the high quality market, China the low price one & US the new tech one, what's left for (most of) the rest?

8) Problem not only that Berlin still selling too much but its policy/philosophy not selling (in many parts of Europe/EU/Eurozone)

1 comment:

  1. Thanks for an illuminating post.

    Much in German economic thinking strikes me as refreshing: the commitment to building real value rather than simply manipulating financial instruments, the concern with productivity despite a good work-life balance, the consensual approach to industrial and for the most part political relations.

    Equally admirable is the commitment to quality and to value for money.

    The upshot is that for a great many types of product they are the only source, or only nearby source - I heard a representative of one German firm talking tonight about the fact that if Athens wants new traffic lights, they have to buy the control systems from Germany because no-one else manufactures them - and even if they have competitors, they're competitive on price and quality.

    Much less admirable is their apparent failure to perceive that if their customers go down the tube, so do German sales. They might perhaps be able to cope with the bankruptcy of Greece, but if they lose Portugal and Ireland that will hurt more; Spain would be an existential problem for the German economy; Italy would be a disaster.

    Given that that's the case, they need to stop smashing the china by insisting on austerity policies that are wrecking their clients' economies, and start assisting them to get back to growth. That's Germany's long-term - even medium-term - interest too. Usually they're good at sensing and working for the long term, so why not now?

    Perhaps it needs a change in government. I rather like Merkel but I'm beginning to wonder whether she's past her sell-by date. The change will come next spring. I hope it'll still be time to make a difference.

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