German Economics Minister Hails ‘Textbook Recovery’

[LiveAndLetBuy]

http://www.ft.com/cms/s/0/5b81a992-dcfb-11df-884a-00144feabdc0.html

Rainer Brüderle, German economics minister, has delivered a robust defence of the country’s economic policy, saying recovery was being driven by domestic demand as well as exports.

“Growing domestic demand shows that our recovery is standing on two feet,” Mr Brüderle said, as he called on Christine Lagarde, French finance minister, to take note of Germany’s “self-sustaining upturn”.

Earlier this year, Ms Lagarde became the cheerleader of critics of the German model when she said Europe’s largest economy was too dependent on exports and that the country was not buying enough foreign-made goods.

Mr Brüderle took a swipe at US calls for more government spending, saying that Germany’s recovery was “a non-Keynesian growth programme” in which fiscal discipline spurred private investment.

He also implicitly criticised China by saying that Germany did “not manipulate its currency” to gain economic advantage, and warned about the dangers for growth of “currency war ... or... trade war”.

Mr Brüderle said the government expected the German economy to grow 3.4 per cent this year – up from Berlin’s spring forecast of 1.4 per cent – and 1.8 per cent in 2011, up from 1.6 per cent.

“It’s a textbook recovery,” the minister said in Berlin, describing how an uptick in foreign demand earlier this year had spurred exports, then investment and finally job creation in Germany itself.

With unemployment expected to fall below 3m this autumn and remain “clearly below” that mark next year, Mr Brüderle voiced optimism that German demand would continue to spur other economies.

At the start of the year, economists had worried about whether the German upturn would be “V-, W-, L- or U- shaped”, he said. “Now we know that was irrelevant. This has become an XL-recovery.”

He conceded growth would be slower next year, in part because of a faltering US. But with China and India still forecasting high growth, important markets for German goods would continue to do well.

The government’s forecasts always lag behind those of professional economists – German research institutes last week forecast growth of 3.5 per cent this year – but are important as the basis for budget planning.

The upward revision of forecasts for economic growth this year and next sets the stage for a potentially bitter row about what to do with billions of euros in additional tax revenue.

Mr Brüderle said the government would not use extra income from taxes to soften its savings package, which is designed to shave €80bn off planned public federal spending over the next four years.

Economists believe the surge in growth, driven by domestic demand and strong exports, could give municipalities, the 16 federal states and the federal government with €30bn in extra earnings until the end of 2011.

The government is trying to get a modest rise in welfare payments through the upper house of parliament, for which it needs the help of the opposition Social Democrats, who want a bigger increase.

It'll be interesting to see how long Germany's "textbook recovery" lasts, what they'll do to control it if it overheats, and what affect it'll have on the parts of the eurozone that are still in recession.

[Executive Sadman]

Anyone got borrowing/deficit figures for the G20?

Some rent-a-gob from the guardian on BBC earlier saying no other country is taking a gamble by cutting like Osbourne.

Of course, my first thought was no one else inherited a 12.5% GDP deficit like Osbourne. Even after 'cuts' our deficit will be larger than most.

[ralphmalph]

Anyone got borrowing/deficit figures for the G20?

Some rent-a-gob from the guardian on BBC earlier saying no other country is taking a gamble by cutting like Osbourne.

Of course, my first thought was no one else inherited a 12.5% GDP deficit like Osbourne. Even after 'cuts' our deficit will be larger than most.

Also I think Germany has just passed a law that from noew on the budget must balance, no more deficits allowed.

[interestrateripoff]

Also I think Germany has just passed a law that from noew on the budget must balance, no more deficits allowed.

If that's the case that's the first sensible action to come out of this mess.

Hopefully that will soon become EU policy.

[Executive Sadman]

If that's the case that's the first sensible action to come out of this mess.

Hopefully that will soon become EU policy.

What exactly is the point of EU policy?

They already had a deficit limit of 3% in the Eurozone. Many countries broke that over the past few years.

Same with the UN, if countries like Israel, the US and ourselves dont listen to it, what is the point?

Other than wasting billions of pounds on more regulations and beancounters no one listens to

[MrPin]

??

[interestrateripoff]

Anyone got borrowing/deficit figures for the G20?

http://news.bbc.co.uk/1/hi/8214272.stm

2007-2010

Deficits as % of GDP

http://1.bp.blogspot.com/_Et4TQ-a0gGU/SbQBS5MXXPI/AAAAAAAABis/_2TSN7u3Be0/s1600-h/page_25_chart.png

http://www.newsneconomics.com/2009/03/imf-outlook-on-global-fiscal-budgets.html

Edited October 21, 2010 by interestrateripoff

[interestrateripoff]

http://seekingalpha.com/article/212173-g20-meeting-s-deficit-goals-are-meaningless

The G-20 met this weekend and set a goal that member countries should cut their deficits in half by 2013. The agreement also calls for G-20 countries to start reducing their deficit to GDP ratio by 2016. Even with such easy to reach targets, success is by no means guaranteed.

For some reason the G-20 recently woke up and realized countries can't continue to forever spend a lot more than their income from tax receipts. Some of them have been doing just this for many decades at this point. The statement released from the meeting said: "Sound fiscal finances are essential to sustain recovery, provide flexibility to respond to new shocks, ensure the capacity to meet the challenges of aging populations, and avoid leaving future generations with a legacy of deficits and debt." So at least ten years after the horse has left the corral, the G-20 now wants to close the gate... but not all the way.

The original proposal for cutting deficits in half was changed from would to should because Japan, the U.S. and India objected. No one actually seems to think that Japan will be able to accomplish this goal. Japan is the most indebted major country on earth with a debt to GDP ratio reaching over 200% this year. Interestingly, the long-term budget projections of the Obama administration are for a deficit of $778 billion for 2013, which would be less than half of the $1.6 trillion projected budget deficit for 2010. The 2013 figure is still almost double the biggest deficit prior to the Credit Crisis however. It also assumes robust GDP growth and minimal inflation during the next few years. Another recession or rising inflation could easily move the U.S. deficit numbers back to well above a trillion dollars.

[interestrateripoff]

What exactly is the point of EU policy?

A meeting group for people to have drink and nibbles whilst having a chat about something important whilst eyeing up the local party girls?

Edited October 21, 2010 by interestrateripoff

[CrashedOutAndBurned]

Stupid Germans. What if we'd followed their economic models after WWII? It would have been awful.

1. The Triumph TR25 would be outselling the MX5

2. Academic kids would be in elite but state-funded Gymnasiums (Grammar schools) and technically and practically minded kids in quality schools to suit hem and the manufactering base. Only a few rich retards would need private education.

3. You'd buy ARM-powered laptops with 20 hour battery life in the Acorn Store.

4. Banks would have been regulated so stringently that they actually served the real economy not idle speculators.

5. Renting would be secure and cheap with the renter holding the upper hand.

6. Football clubs would be required to give fans a huge say in how they are run and not be leveraged playthings of Arabs and Oligarchs full of prostitute-banging brats.

7. Unions and bosses would actually sit down and work out how to progress their companies.

Thank god we didn't do any of that and just went with the flow towards a successful financial sector and McJob service economy.

[Johnny Cash]

Stupid Germans. What if we'd followed their economic models after WWII? It would have been awful.

1. The Triumph TR25 would be outselling the MX5

2. Academic kids would be in elite but state-funded Gymnasiums (Grammar schools) and technically and practically minded kids in quality schools to suit hem and the manufactering base. Only a few rich retards would need private education.

3. You'd buy ARM-powered laptops with 20 hour battery life in the Acorn Store.

4. Banks would have been regulated so stringently that they actually served the real economy not idle speculators.

5. Renting would be secure and cheap with the renter holding the upper hand.

6. Football clubs would be required to give fans a huge say in how they are run and not be leveraged playthings of Arabs and Oligarchs full of prostitute-banging brats.

7. Unions and bosses would actually sit down and work out how to progress their companies.

Thank god we didn't do any of that and just went with the flow towards a successful financial sector and McJob service economy.

Yeah, you're right. If Britain had done that the government would today have revised its GDP forecast up to 3,4%, like the Germans did today...

[Executive Sadman]

http://news.bbc.co.uk/1/hi/8214272.stm

2007-2010

Deficits as % of GDP

http://1.bp.blogspot.com/_Et4TQ-a0gGU/SbQBS5MXXPI/AAAAAAAABis/_2TSN7u3Be0/s1600-h/page_25_chart.png

http://www.newsneconomics.com/2009/03/imf-outlook-on-global-fiscal-budgets.html

Thanks, i think that illustrates what i was thinking.

These 'cuts' will still leave us with a deficit far in excess of all other major nations.

[MrPin]

Stupid Germans. What if we'd followed their economic models after WWII? It would have been awful.

Your point is well taken! The Germans do seem far more sensible than us, and less driven by manias, despite my Nazi Christmas Ornament post!

[1929crash]

http://www.ft.com/cms/s/0/5b81a992-dcfb-11df-884a-00144feabdc0.html

It'll be interesting to see how long Germany's "textbook recovery" lasts, what they'll do to control it if it overheats, and what affect it'll have on the parts of the eurozone that are still in recession.

Don't expect cuts to have the same effect here. Germany has a strong manufacturing sector and has a trade surplus with the rest of the world, plus it has outlawed many dodgy financial practises - something that would never happen here thanks to the political influence of the City.

[mattyfc]

Germany is massively benefiting from the euro. In a normal recession ( like in 1990~) weak inefficient consumer lead economies (like us) are able to devalue so they can compete with the more efficient exporting economies (like Germany).

40% of German exports go to the eurozone. It is reasonable to assume that without the euro most European currencies would have devalued 30% against the Deutschmark. Spain and Greece probably more like 50%. German growth would be much lower than it is now. Growth in the rest of the Eurozone would be much higher.

They are "stealing" growth from the rest of the eurozone. Without external rebalancing there is no way of the periphery of Europe growing. They are already in recession according to the PMI data released yesterday.

Germany♠ will end up recycling the growth generated as loans to keep the periphery of the eurozone solvent and will gain nothing.

Brilliant.

[Tired of Waiting]

Anyone got borrowing/deficit figures for the G20?

Some rent-a-gob from the guardian on BBC earlier saying no other country is taking a gamble by cutting like Osbourne.

Of course, my first thought was no one else inherited a 12.5% GDP deficit like Osbourne. Even after 'cuts' our deficit will be larger than most.

Some numbers below.

(Some months old, but it gives a good idea of the problem.)

http://blogs.telegraph.co.uk/finance/edmundconway/100005840/britain-no-longer-has-the-worst-deficit-in-europe/

[yellerkat]

Anyone got borrowing/deficit figures for the G20?

Some rent-a-gob from the guardian on BBC earlier saying no other country is taking a gamble by cutting like Osbourne.

Of course, my first thought was no one else inherited a 12.5% GDP deficit like Osbourne. Even after 'cuts' our deficit will be larger than most.

I've taken the liberty of attaching a graphic from IRR's link in post #7 - which does look overly optimistic.

[mattyfc]

Anyone got borrowing/deficit figures for the G20?

Some rent-a-gob from the guardian on BBC earlier saying no other country is taking a gamble by cutting like Osbourne.

Of course, my first thought was no one else inherited a 12.5% GDP deficit like Osbourne. Even after 'cuts' our deficit will be larger than most.

This is total nonsense:

From

http://online.wsj.com/article/SB10001424052702304023804575566350666801536.html?mod=WSJEUROPE_hpp_MIDDLETopStories

"Unprecedented cuts?

The spending review inevitably produced plenty of hyperbole. Across Westminster and much of the U.K. media, the cuts have invariably been described as unprecedented—which of course is true, providing one ignores all the precedents. Far from being the deepest cuts in modern times, the Institute for Fiscal Studies calculates the proposed 3.6% real-terms cuts in public spending over fives years are only the deepest since 1976. Nor are they unprecedented even in our own times: Greece, Ireland, Portugal and Spain are all attempting far larger and faster fiscal consolidations than the U.K., measured by the planned reductions in their deficits. Spain plans to reduce its deficit from 11.2% of GDP at the end of 2009 to just 6% by the end of 2011, during which time the U.K. hopes to cut its deficit from 11% to 7.5%.

The U.K. is not even doing anything unusual by focusing its deficit-reduction plan on spending cuts rather than tax hikes since that is what other European countries are doing. The one thing different about the U.K. plan is that it isn't proposing to cut public sector salaries, as has been done in Ireland, Portugal, Greece and Spain. Instead, the U.K. is focusing on slashing departmental expenditure. "

The difficult bit is going to be meeting our growth targets. No more HPI, we will have to find a new sustainable way to grow. Having our own currency should make it easier.

[Executive Sadman]

This is total nonsense:

From

http://online.wsj.com/article/SB10001424052702304023804575566350666801536.html?mod=WSJEUROPE_hpp_MIDDLETopStories

Doesnt surprise me, like i said he was from the guardian. It was a soundbite TV interview, no one was going to ask him to prove what he was saying.

The difficult bit is going to be meeting our growth targets. No more HPI, we will have to find a new sustainable way to grow. Having our own currency should make it easier.

Surely there will be some mathmatical trickery with inflation stats, and some bright spark in 20 years time will say, 'hey we werent actually growing during this time, just experiencing inflation.' and be given a job at the BoE for his insightful ability to state the obvious. Jobs and unemployment is the only real judge of a recovery that matters to most people IMO.