Friday, May 15, 2009

Economic Downturn in Germany

The struggles of companies such as Leoni led the Germany economy to suffer its biggest quarterly decline in gross domestic product since the Second World War. In the first quarter of 2009, the economy shrank by 3.8% from the three months before, the decline accelerating from the 2.1% contraction that took place in the quarter earlier. The comparable figure for the euro zone as a whole was 2.5%, highlighting how a country that had neither a banking crisis on the scale of Britain or the United States, nor a population used to living on credit has been one of the most exposed to the downturn.

Germany was part of a trade triangle that has collapsed," said Ken Wattret, senior economist at BNP Paribas. A virtuous circle beginning around 2005 when consumer demand from the U.S. and Britain fuelled demand from Asian producers, boosting demand for Germany's high end manufacturing products.

Adding to Germany's woes is the collapse of business investment, says Wattret. German growth has been more dependent on business investment than many other developed countries, led by confidence in the export market, he said.

Read it all here.

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