Lurking Problems

Germany’s Boom Under Threat

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Germany is currently Europe's strong man.
  • Why it matters

    Why it matters

    Germany current economic boom is endangered by long term threats, such as a low birth rate, reform fatigue and wealth inequality.

  • Facts


    • German unemployment in May fell to its lowest level since the post-unification boom in 1991.
    • The German economy could grow by 2.5 percent this year, according to the Kiel Economics research institute.
    • Germany has the lowest birth rate in the world, which poses a major obstacle to its long-term growth outlook.
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These are tough times for the world economy. The Greek debt crisis has Europe on tenterhooks, China is cooling off and even U.S. growth slumped in the first three months of this year.

Only Germany, Europe’s largest and the world’s fourth biggest economy, keeps on expanding. Its jobless total fell to 2.7 million in May, the lowest level since 1991, when Germany was on a high after unification.

At the time, confidence abounded that the unified economy would be able to keep up the boom that West German industry had been enjoying. Years of disappointment followed, and consistent anaemic growth combined with runaway welfare costs earned Germany the title of sick man of Europe in the early 2000s.

Reforms and cutbacks followed, and things look very different today. Germany’s current economic expansion is regarded as robust. Like a pacemaker in a marathon, the Germans have consistently been running ahead of their European partners. In the last five years, German GDP growth has outpaced the euro-zone average by more than a full percentage point.

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