GERMANY RALLIES AS UK RECOILS
NEXT month thousands of people from across the world will go to Germany to visit Domotex, the floor coverings trade fair. Typically, there will be a shamefully small British presence. Exporting is crucial to help boost the economy, but that message hasn’t got through to many flooring firms in the UK.
Foreigners who travel to Domotex may also get a sense of growing optimismin Germany and, in particular, how its approach to dealing with the recession starkly contrasts with that of the UK’s coalition government.
Recent German economic success has received little media attention in Britain, perhaps for obvious historical reasons. Germany suffered terribly during the recession last year (possibly worse than the UK), but in a short time it regenerated and is now forecast to achieve its biggest resurgence in over 20 years with growth of 3.5% in 2010, unrivalled among the major western economies.
Unlike Britain, Germany has nurtured its manufacturing sector, motor vehicles being a prominent example. It also encourages its exporters. In fact, Germany is the world’s second biggest exporter after China with a surge in sales abroad. The UK, by contrast, is exporting less and less.
It’s notable that the construction industry in Germany is buoyant, following a 1.4% rise in government spending in the second quarter. Meanwhile, the British government, hell-bent on slashing public spending, has left some in the construction industry fearing a double dip recession.
After initial spending cuts in Germany, the government shrewdly targeted investment into areas which produce growth and jobs, despite increasing the deficit (a Tory sin).
As a consequence Germany is enjoying higher domestic consumption, helping to fire up the economy. The reverse is occurring in the UK with the decline expected to escalate after the VAT rise next month, pushing some private sector firms to lay off staff, adding to the jobless total.
Once again, the figures tell the story. Unemployment in Germany is falling, while in the UK it is increasing. Before reactionary readers assume there’s a socialist message in here some where, I should point out that the German Chancellor, Angela Merkel, has political leanings not too dissimilar to that of David Cameron – centre right.
The difference is that Mr Cameron insists there is no alternative to savage spending cuts. Mrs Merkel, on the
other hand, decided to jump-start the Germany economy. The outcome was summed up by the respected financial news publisher Bloomberg: ‘Government spending lifted Germany out of its worst recession since World War II.’
Economic uncertainty will remain in 2011, but when the recovery kicks in, the result (that we England football fans dread to hear) will be that the winner is Germany.
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