Well I’m certainly not gloating, but I don’t mind being right.

“So where does it leave Germany? I really do not know but one thing is sure; social market and labour market reforms are the cure!”

Can I disagree a bit with your wording while agreeing with the sentiment. I’m not sure they are the ‘cure’ since I’m not sure there is a cure as such. Certainly they will help, and doing nothing will only allow things to get worse, but to some extent the Germans are going to have to live with the fact that they aren’t going to be exactly a growth tiger from now on. Living within your means would be a good slogan. I think basically the last big opportunity they had was with the EU expansion and trying to attract a lot of young people from the East (to Germany’s benefit, and at the expense of those Eastern countries). They didn’t want to know however, and now they don’t want to know about encouraging young people to come from Turkey and settle. So I think now we are getting past the point where tinkering with the pyramid is going to work, so we need plan ‘b’, and as you say, “reform, reform, reduce benefits, reform, reduce benefits,reform” will be the watchword.

Not all the press coverage has been as simplistic as the majority. This one here is an interesting read, as is this.

There is some discussion about the reliability of the data. There always is. The FT makes this point, which I think is the issue:

Doubts were raised about the accuracy of Tuesday’s data and retail sales might have rebounded in January as Germans took advantage of special offers. But the figures were consistent with the long running trend whereby robust exports and rising corporate investment have stubbornly refused to translate into jobs and stronger consumer demand.

He he … feeling vindicated are we?

Well, whether expected or unexpected this is not good news. I am in my pessimitic mood today (see my latest post at Alpha.Sources) and the fact that the European engine room is still running in first gear is not good.

The obvious question to ask obviously is why Germany and France are slumbering away and have been so for some time now.

The fact that we keep hoping for a recovery based on quarterly and monthly indicators just to be let down as the next quarter or month comes by suggests that Germany and France have structural issues. This is hardly a new analysis but I think it is important to stress the long term perspective here.

I actually have confidence in Merkel’s ability to re-shape the country but the new parliamentary scene in Germany might seriously impede or halt any major reforms.

So where does it leave Germany? I really do not know but one thing is sure; social market and labour market reforms are the cure!