Germany: An Optimistic Note From The IMF

Michael Deppler, Director, European Department of the International Monetary Fund, said in a conference call on the economic outlook for the eurozone, that all was not as bleak as it seemed for the German economy:

Then, you know, coming back to Germany, no question but that the past decade has been a very difficult one for Germany, but it’s one where it has registered strong improvements in competitiveness, and that you can see it clearly in the behavior of its exports. And just as, you know, strong improvements in competitiveness in France during–from the mid-eighties to the mid-nineties led to quite strong performance from the mid-nineties to now in France, well, basically we would expect the same thing to happen in Germany over the next five to ten years.

So in our view, the longer-term developments are, you know, not buoyant, but they’re certainly not things to be as negative about as seems to be the prevailing mood in Europe today.

This entry was posted in A Few Euros More, Economics and tagged , by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

7 thoughts on “Germany: An Optimistic Note From The IMF

  1. Improved German competitiveness compared to other countries has been something of a well-kept secret for some time.

    The main problem now is lack of domestic demand.

    The risk now is that policy proposals being put forward for the upcoming election mostly are designed to improve competitiveness at the expense of domestic demand.

  2. “the upcoming election mostly are designed to improve competitiveness at the expense of domestic demand.”

    In agree. There is a distinct danger from deflationary policies in Germany. I have been arguing this for some time. (see my who is Elga Barsch post about august 2004).

    The interesting thing is after the Euro rise the Germany exporter seems much more efficient than the US one. No-one seems to be arguing for structural reforms in the US it seems, to solve the CA deficit problem I mean.

    The problem is the structural one in the labour market in Germany IMHO.

    Of course that still leaves the ageing bit :).

  3. “The problem is the structural one in the labour market in Germany IMHO.”

    Maybe not even that any more.

    Peter Bofinger, member of the “Sachverst?ndigenrat” Council of Economic advisers has argued that labour turnover nowadays is of the order of 7 Million people per year, compared to 5 Million jobless and that this is a sign of considerable flexibility.

    The ECB recently argued in a paper that the German labour market is rather more flexible than those of Southern European countries, giving Germany an advantage in foreign markets

    In real terms, workers’ incomes have been stagnating for many years now while productivity and company profits have been growing at a healthy pace.

    “Lohnst?ckkosten” (What’s the technical English term ? Labour cost per item/value produced) are competitive even when compared with Eastern Europe.

  4. “Lohnst?ckkosten” (What’s the technical English term).

    Unit Labour Costs. The thing is my German technical vocabulary is improving fast since I have been listening to the webcasts of Hans Werner Sinn’s lectures to try to improve my (lamentable) German. Mr Suit, I tend to call him. Anyway he is interesting, even if I don’t entirely agree with him. What is it: the Bazaar economiy. Or should that be the bizarre economy?

    I will look into Bofinger comments before commenting further. Maybe a post :).

  5. Peter Bofinger has an interesting book out “Wir sind besser als wir glauben” ( We are better than we think ), if you want to improve your German reading skills. It basically is written for economy laymen, so it might be viable for a non-German 😉

    He puts forward a lot of arguments that run counter to the conventional view about the German economy.

    Oh, and he has nothing good to say about H.W.Sinn. He calls him an industry lobbyist rather than an economist.

    A “Bazaar Economy” is a country that imports stuff, does little but repackaging it, and reexports the stuff for a profit, but with no real added value. I haven’t read Sinn, but Bofinger argues that it is nonsense to call Germany a Bazaar, just because lots of components are imported from Eastern Europe or elsewhere. Statistics show that there is substantial value added in Germany.

  6. Well he seems to have his own personal portal at the IFO:,1&_dad=portal&_schema=PORTAL

    Browse around. The arguments are serious enough, even if you don’t accept them all. I think someone saying he is *only* an industry lobbyist already starts to make me feel worried.

    And if you like punishment, someone in Germany who is in the same ballpark as me is this guy:

    I’ve got a post half prepared on a paper of his ageing answers and more questions, looks like it will go up tomorrow now :).

  7. Thanks for the pointer. I will look it up.

    “He calls him an industry lobbyist rather than an economist.”

    Those were my words.

    But I think they are a reasonable summary of Bofinger’s attitude towards Sinn. Bofinger argues against Sinn’s points of view in considerable detail.

Comments are closed.