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Germany's GDP 'horror story'

Thursday, October 09, 2014 - 02:29

Germany's exports have plunged and growth forecasts have been slashed. David Pollard asks if Europe's largest economy is doing enough to prop up its economy and others in Europe.

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European unity in its pomp as Berlin greets Poland's new first lady. A quarter of Poland's exports go to its western neighbour. There was concern then when Poland cut interest rates this week - and said tepid German demand was a reason. In fact, one economist, calls it a ''horror story'' of a week for Germany. Data showed exports in August suffering their sharpest drop in years - down almost 6 per cent. There were similar plunges in industrial output. So should Germany spend more to save itself - and the euro zone - from recession? There's little hope it will, judging by the latest remarks from its finance minister. SOUNDBITE (German) WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER: ''We Europeans have to become stronger. We have to deliver more growth. I agree 100 per cent. But it must be achieved, it's not to be achieved by writing cheques.'' Chancellor Merkel has the 'Scwharze Nul' as the central plank of her mandate - loosely translated, that's a 'black zero' or balanced budget. It's thought only a labour market crisis - high unemployment - could shift her position. Some think she may be willing to bargain some extra spending for deeper reform in France and Italy. The lack of that - and sanctions on Russia - is weighing heavily. Michael Hewson of CMC Markets. SOUNDBITE (English) MICHAEL HEWSON, CMC MARKETS: ''Germany as the biggest economy in Europe and whose key export markets are essentially these countries that are going to have to restructure their economies is going to be unfortunately one of, you know, is going to feel the effects of that. That wrapped up with the fact that China is also slowing down, I think Europe is probably going to be in for a bit of a rocky ride over the next six to twelve months.'' The IMF says Germany could spend more on infrastructure. It's joined by leading institutes within Germany - they warned the ECB alone can't take the load. But if Europe's locomotive is running out of steam, there may be positives, says economist Jim O'Neill. SOUNDBITE (English) JIM O'NEILL, ECONOMIST: ''Three months ago the Germans could sort of sit there in a somewhat perhaps almost arrogant manner saying 'Well, we don't care because we're strong while the rest is weak', that's not the case anymore. So if it carries on like this the Germans are going to change their policies, which ironically might help others more than Germany.'' Adding to the gloom, Germany's GDP forecasts were slashed this week. They're positive for the year. But Q2 growth did see a drop. The latest data has more and more wondering whether Q3 will see the same.

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Germany's GDP 'horror story'

Thursday, October 09, 2014 - 02:29