Bad news in the euro zone: Germany’s economy contracts

posted at 12:01 pm on January 15, 2013 by Erika Johnsen

Despite the euro zone’s various bureaucracies wheeling and dealing in bailouts, stimulus efforts, and “austerity” programs for years now, they haven’t really managed to move the collective needle on coming up with long-term substantive initiatives for solving their members’ metastasized debt problems.

Plenty of Europeans seem to hold the blasé, zero-sum notion that Germany should just stop being so darn tight-fisted and simply share the wealth of their relatively sane fiscal management, but even Germany isn’t immune from the effects of the EU’s long-term poor fiscal policies. The WSJ reports that Germany has finally succumbed to the economic weakness pervading the rest of the euro zone, registering a contraction in the fourth quarter that likely means the common currency shared the same fate:

Germany’s federal statistics office Destatis Tuesday said Europe’s largest economy expanded 0.7% in 2012, but its gross domestic product probably fell by 0.5% in the fourth quarter. …

That equates to a contraction of 2.0% in annualized terms, JP Morgan estimates. …

Compounding the problems for Germany, the government is cutting its 2013 economic growth forecast to 0.4% from 1.0% previously, a German economics ministry official told The Wall Street Journal on Tuesday. …

The euro-zone economy contracted in both the second and third quarters as austerity programs and rising unemployment ensured that output fell in large members such as Spain and Italy. …

But those contractions in other parts of the euro zone, and less favorable export markets, finally took their toll in the final three months of the year. And when it came, Germany’s economic downturn was deeper than expected, as the majority of private-sector economists had penciled in a quarterly drop in GDP of 0.2% or 0.3%.

The general wisdom (of which I am wildly skeptical, for the record) seems to be that the German economy could rebound fairly quickly, since the absolute worst of the euro zone’s immediate economic crisis may perhaps be over as uncertainty wanes and investments and exports recover as other areas of the global economy strengthen.

But, the fact remains that the euro zone is still ripe with miserable economic conditions (Spain’s current unemployment rate stands at over 25 percent!), the endemic fiscal problems aren’t fixed, and the reigning sense of entitlement will always take a massive chunk out of would-be robust prosperity. Most unfortunately, as The Economist recently lamented, this type of systematic political can-kicking is already a transatlantic sport:

FOR the past three years America’s leaders have looked on Europe’s management of the euro crisis with barely disguised contempt. In the White House and on Capitol Hill there has been incredulity that Europe’s politicians could be so incompetent at handling an economic problem; so addicted to last-minute, short-term fixes; and so incapable of agreeing on a long-term strategy for the single currency.

Those criticisms were all valid, but now those who made them should take the planks from their own eyes. America’s economy may not be in as bad a state as Europe’s, but the failures of its politicians—epitomised by this week’s 11th-hour deal to avoid the calamity of the “fiscal cliff”—suggest that Washington’s pattern of dysfunction is disturbingly similar to the euro zone’s in three depressing ways.

… The euro crisis deepened because Europe’s politicians serially failed to solve the single currency’s structural weaknesses, resorting instead to a succession of temporary fixes, usually negotiated well after midnight. America’s problems are different. Rather than facing an imminent debt crisis, as many European countries do, it needs to deal with the huge long-term gap between tax revenue and spending promises, particularly on health care, while not squeezing the economy too much in the short term.


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Bad news in the euro zone: Germany’s economy contracts

Seems socialism/Marxism doesn’t actually work anywhere after all. Who saw that coming…

President Obama to be arrested and Impeached.

SWalker on January 15, 2013 at 12:05 PM

Those poor bastards are tired of their country being the Eurozone’s bank anyway.

msupertas on January 15, 2013 at 12:05 PM

Mein Gott, and Mon Dieu!!

So, how long before German taxpayers say “No more” to the PIIGS?

JohnGalt23 on January 15, 2013 at 12:06 PM

The EU nearly broke itself bailing out little Greece.

What happens when its Italy, Spain, Portugal, Ireland, and France’s turn?

There isn’t enough wealth in the world to bail all of them out.

Rebar on January 15, 2013 at 12:07 PM

Hey, isn’t it great that we’re following in their Goose-steps?

/sarc.

Galt2009 on January 15, 2013 at 12:09 PM

… to be followed shortly by the rest of the idiot sheep of the planet.

platypus on January 15, 2013 at 12:12 PM

The general wisdom (of which I am wildly skeptical, for the record) seems to be that the German economy could rebound fairly quickly, since the absolute worst of the euro zone’s immediate economic crisis may perhaps be over….

Unless it’s not, which is probably the correct way to view it.

ScottG on January 15, 2013 at 12:12 PM

One thing you can consistently count on politicians doing – SCREWING THINGS UP!

GarandFan on January 15, 2013 at 12:13 PM

Uh-oh!

BigGator5 on January 15, 2013 at 12:13 PM

I wouldn’t be surprised if there was a sudden push to legalize drugs, if nothing else as an attempt to get people too stoned to riot.

Germany has been used as a national ATM for the Eurozoned-out and this was completely inevitable.

MelonCollie on January 15, 2013 at 12:15 PM

Seems socialism/Marxism doesn’t actually work anywhere after all. Who saw that coming…

It only really works well for those on top who live royally off the sweat and blood of everyone else.

hawkeye54 on January 15, 2013 at 12:16 PM

Nice poll up on http://www.marklevinshow.com

“Is Pres. Obama an imperial President?”

As of 12:00 Eastern
98% yes
2% no

Plus Mark say that if Obama attempts to up the debt celling by Pre. Executive Order then Obama should be impeached.

Same day, Steve Stockman, Republican from 36th dist. of Texas, Southeast of Houston Tx. says that if Pres. Obama attempts to do gun control by executive orders then he Stockman will file art. of impeachment.

Obama is bluffing, call his weak commie hand.

APACHEWHOKNOWS on January 15, 2013 at 12:16 PM

msupertas on January 15, 2013 at 12:05 PM

So, how long before German taxpayers say “No more” to the PIIGS?

JohnGalt23 on January 15, 2013 at 12:06 PM

“Weep not for (them) but for your children.”

Germany can leave the Eurozone with pain and chaos, to be sure, but let one of our states try that.

The best news for the left was that the US and Israel were the last two bastions of prosperity left among the super developed. Israel is tottering in a state of siege and the US Bolsheviks have discovered a magic way to turn ballots into freebies and money.

IlikedAUH2O on January 15, 2013 at 12:20 PM

Same day, Steve Stockman, Republican from 36th dist. of Texas, Southeast of Houston Tx. says that if Pres. Obama attempts to do gun control by executive orders then he Stockman will file art. of impeachment.

APACHEWHOKNOWS on January 15, 2013 at 12:16 PM

0_0

If there is anyone who might possibly stand by this sentiment, it would be someone from Texas.

MelonCollie on January 15, 2013 at 12:21 PM

All the EU has to do is raise taxes on the rich and make them pay their fair share and everything will be hunky dory. Ya…right! The future of the US is unfolding in Europe right now.

Deano1952 on January 15, 2013 at 12:23 PM

Plus Mark say that if Obama attempts to up the debt celling by Pre. Executive Order then Obama should be impeached.

Just add that to many other reasons Barry should, but won’t, be impeached. It’d never make it past the Senate.

hawkeye54 on January 15, 2013 at 12:28 PM

Because financiers don’t mind stratospheric debt.

Speakup on January 15, 2013 at 12:35 PM

Because financiers don’t mind stratospheric debt.

Speakup on January 15, 2013 at 12:35 PM

They’ll be very careful about objecting to the wishes of the biggest military might on the planet. Especially one that is currently ruled by a Marxist god-king who doesn’t really care about laws all that much.

MelonCollie on January 15, 2013 at 12:37 PM

Ordinary Germans and Brits are no fans of the superstate.

Alas, their masters are.

EU UBER ALLES!

CorporatePiggy on January 15, 2013 at 12:38 PM

Too many old people in Europe…

albill on January 15, 2013 at 12:40 PM

Same day, Steve Stockman, Republican from 36th dist. of Texas, Southeast of Houston Tx. says that if Pres. Obama attempts to do gun control by executive orders then he Stockman will file art. of impeachment.

APACHEWHOKNOWS on January 15, 2013 at 12:16 PM

Isn’t the Gulf of Mexico southeast of Houston? :-)

CycloneCDB on January 15, 2013 at 12:41 PM

Umm…you know Germany is the one pushing these same policies that are hurting the European economy and forcing continued contraction, right?

blue13326 on January 15, 2013 at 1:00 PM

It will continue to do so.

Bmore on January 15, 2013 at 1:08 PM

And yet the screeching from the Left for America to “be more like Europe” continues, unabated.

Germany was propped up as the ideal model by the Left for the past 4 years. Now what?

visions on January 15, 2013 at 1:12 PM

For years, German banks lent billions of Euros to spendthrift, functionally insolvent countries like Greece, Italy, and Spain, in order to finance domestic exports. Their economic growth was as illusory as that of the debtor countries, as that level of borrowing was unsustainable.

Now that the bubble has burst, austerity has been forced on the PIIGS, and there is no one to pick up the export slack, it’s little wonder that Germany’s economy is contracting.

Germany didn’t bail out the PIIGS; it bailed out its own tottering banking sector, which is on the hook for billions recklessly lent to people who never would have been able to pay it back (sound familiar)?

The entire “export led” economic growth model is a house of cards. Not every country can be an exporter, with a trade surplus, and net importers, with their trade deficits, will always, at some point, go bust, especially if they cannot print their own money and debase the currency. This is why China has begun the painful steps to reorient its economy towards internal consumption.

The world’s debt financed consumption binge is now over, and as with all binges, the hangover is going to be awful.

Mr. Arkadin on January 15, 2013 at 1:34 PM

And yet the screeching from the Left for America to “be more like Europe” continues, unabated.

Germany was propped up as the ideal model by the Left for the past 4 years. Now what?

visions on January 15, 2013 at 1:12 PM

Ding! Ding! Ding! The question of the decade.

The American public knows that socialism is no good. Except for Vermont, it weakens whoever advocates it or most programs based on it. They do love their freebies but new programs scare them. So you can’t get it done? Yes?

But the answer is that elections are run only so often and the key is to keep the opposition weaker and charge in with the messy government solutions when things are in a crisis. Of course, part of being weaker is getting your troops in the media to blame the last ruler for everything and demonize the next opponent and any and all threats from the other side. Then there is the famous quote about not wasting a crisis….

IlikedAUH2O on January 15, 2013 at 1:50 PM

It’s far worse than it even looks. The germans are repatriating the gold bullion they have on deposit with our Federal Reserve.

http://www.zerohedge.com/news/2013-01-14/it-begins-bundesbank-commence-repatriating-gold-new-york-fed

rayra on January 15, 2013 at 2:01 PM

Germany’s economy contracts

O scheissen…

MNHawk on January 15, 2013 at 2:12 PM

I guess I am not surprised. Germany is not an island. What happens to their neighbors and trading partners affects them too. But there is only so far they can go if others don’t work to fix what they are doing wrong.

Russ808 on January 15, 2013 at 3:36 PM

But I’m sure they’ll still manage to print money to bail out Greece and other countries, probably raise taxes, and say they need to spend even more?

Germany’s situation sounds familiar…what other country not in Europe…hmmm…ah well, anyway.

And yet the screeching from the Left for America to “be more like Europe” continues, unabated.

Germany was propped up as the ideal model by the Left for the past 4 years. Now what?

visions on January 15, 2013 at 1:12 PM

Oh, they’ll ignore all this? They’ll make up phoney numbers? Er, they’ll say that we’re different than Germany so it’s apples and oranges?

Anything to avoid admitting they’re wrong and stuff like that.

Dr. ZhivBlago on January 15, 2013 at 4:04 PM

The EU crisis isn’t over. It’s not only not the beginning of the end of the crisis, it isn’t even the end of the beginning yet. All they’ve done is paper over the failures with “restructuring” and assumptions built of thin tissue to withstand the coming hard rain.

We will have our own version exposed as soon as someone notices the nearly $3 trillion of federal debt the FRB has purchased and asks, “With what, exactly, did they buy it?”

Adjoran on January 15, 2013 at 5:25 PM