Spare the rod and spoil the child. This old saying is defenitely not pertinent as far as the raising of children is concerned. And even more principally, there is too much violence in the world and far too less diplomacy. But in the case of Germany, sparing the rod seems no longer the alternative. The child is completely spoiled, more precisely the responsible German politicians and economists. So, no danger of child abuse here.
The background, however, is childishly simple. Today the German Federal Statistical Office presented the most recent and yet preliminary figures for Germany´s current account and foreign trade.
It says: “According to provisional results of the Deutsche Bundesbank, the current account of the balance of payments showed a surplus of 166.9 billion euros in 2012…” Around 20 billion Euro more than in 2011.
That means 20 billion more debt than in 2011 for the rest of the world and in absolute terms 166.9 billion debt in 2012.
How can this work, when the Eurozone did not grow in 2012 but shrink (-0,44 % real GDP)?
The answer is again childishly simple: Since Germany is so far through with indebted Europe (exports to the Euro area -2,1%; imports from the Euro area: +0,7%; exports to Europe: -0,3%; imports from Europe: +0,9) it seeks greener pastures elsewhere, statistically spoken in “third countries” outside Europe (exports to third countries: +8.8%; imports from thrid countries: +0.4%).
German politicians argue this development is about competitivness. But what about domestic demand? At least someone has to buy all those German exports. A short hinsight on some economies presented in the annual macro-economic database of the European Commission’s Directorate General for Economic and Financial Affairs shows this:
Annual change in real domestic demand, 2000-2012 (click to enlarge chart)
Germany´s growth in domestic demand is lagged well behind the other economies in the pre-crisis period 2000 to 2006 (with the exception of Japan in 2006). And in 2012 the United States and even Japan realized higher growth in domestic demand than Germany.
That raises the question, how long those countries which are doing more to bring their economies back to growth than Germany will look on helplessly Germany´s export performance which is not made in Germany but made in USA, Japan and elsewhere in the world? In other words: How long will the rest of the world say thank you to Germany and spare the rod to spoil the child?
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