Europe’s Engine

As Europe’s biggest economy, Germany needs to learn change if it is to help lead the rest of the Eurozone out of the fiscal mire – but can an old dog learn new tricks? As The Economist remarks, a decade ago Germany was “the sick man of Europe”, riddled by high unemployment and slow growth. But it has since developed into the world’s second largest exporter (after China) and in spite of the recession its unemployment levels are lower than they were five years ago. This flexibility and success is laudable, but is it sustainable within the current climate? The Economist says no: “Germany is rightly proud of its ability to control costs and keep on exporting. But it also needs to recognise that its success has been won in part at the expense of its European neighbours. Germans like to believe that they made a huge sacrifice in giving up their beloved D-mark ten years ago, but they have in truth benefited more than anyone else from the euro. Almost half of Germany’s exports go to other euro-area countries that can no longer resort to devaluation to counter German competitiveness.”