In comments here, Edward has addressed a question I was also thinking about this morning. He writes, “So the new coalition’s ‘play’ will be to try and really push-start domestic consumption in 2006. Obviously they hope some consumption will be brought forward in order to avoid the tax.”
Tax and a positive contribution from the ECB are important, of course, but I wonder if there aren’t other hindrances to domestic consumption. I’d be hard pressed to think of an upswing in the German economy that wasn’t led by exports and fed by investment. Domestic consumption brings up the rear.
Add to that strong admonitions in the culture that consumption is bad. Look at any apartment building and count the number of “No ads please” stickers on mail slots. Add in the Ã–ko (“ecological”) position that the best contribution to the environment is to consume as little as possible. Add deep cultural mistrust of credit. Add some of the demographic trends that Edward has written about in detail. All of these suggest that there are barriers to a recovery sustained by domestic demand that go beyond fear of the taxman.
Or I could be wrong. Americans, after all, have famously overthrown their Puritan heritage and consume enough to keep the world economy afloat. The hard-core economists could be right, and culture might play no role at all in household decisions. I honestly don’t know what to think about German consumption. Further thoughts, anyone?