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Germany has a problem...its name is Greece
Germany has supply chain operations ingrained in their workers. It's not recommended for any foreigner to go to Germany and show up one minute late for a meeting. They are certainly too sophisticated to formally slap you on the wrist, but the ignorance you feel walking into the room after they've already started will fill you with shame.
Although it is the 63rd largest country by land, Germany's GDP is consistently in the top five in the world. Germany's history is filled with military imperialism and industrial breakthroughs. This has led Germany to be one of the top exporting nations. After reuniting in 1990, Germany has experienced continued growth while industrializing the eastern portion if its nation. Germany joined the European Union in 1999 and converted to the Euro as its main currency shortly thereafter.
Although the automobile industry has been a drag during the recession, its machinery and technology exports have fared relatively well. Forecasts have placed Germany among the quickest to recover from the recession with expected GDP growth of about 2% in 2010.
As all signs continue to look positive, what will be the thorn in Germany's side for years to come? Greece, Italy and Spain.
Those three countries are all facing issues with government issued debt. Greece was recently downgraded by rating agencies Fitch and S&P. Italy must be high on their watch list with over 120% of government debt to annual GDP. Spain's economy is retracting at a 4% rate and 13% unemployment, with no global competitive advantage to use as protection.
The common link is the European Union (EU). As mentioned in the article about Ireland, the EU forces restrictions on its member countries. As risk of the weaker countries increases, willingness of the market to lend these countries money to continue operations will be tougher. This puts Germany in bed with its weaker neighbors. Why?
As the cost to issue debt for these countries continues to increase, the EU will pressure stronger nations to lend at lower rates. Abu Dhabi of the United Arab Emirates had provide up to $10 billion to support Dubai in its time of crisis. Germany's Chancellor has already mentioned there have been talks to provide similar bridge funding if these countries continue weaken. Certainly, this is good for the weaker players in the EU, but it restricts Germany from using the money for projects with a higher return or risks loss on their investment.
In order for these countries to succeed on their own, most economists think they would need to eliminate their ties to the EU, add liquidity to their system, and weaken their currency to cover interest payments. In a time of crisis, doing this would only add to the fear in these weaker EU economies. This option, though on the table, seems to be a far stretch.
Along with every scenario, there is a good side for Germany. Since the downgrade of Greek government debt, the Euro has weakened over 6% to the dollar. As the Euro weakens, it makes Germany's specialty, exports, cheaper for non-Euro countries to buy.
All looks bright in Germany for now, but if a loan is made to these weaker countries, they will suddenly have a ball and chain dragging on their growth.
http://www.examiner.com/x-28053-Huntsville-Economy-Examiner
Germany has supply chain operations ingrained in their workers. It's not recommended for any foreigner to go to Germany and show up one minute late for a meeting. They are certainly too sophisticated to formally slap you on the wrist, but the ignorance you feel walking into the room after they've already started will fill you with shame.
Although it is the 63rd largest country by land, Germany's GDP is consistently in the top five in the world. Germany's history is filled with military imperialism and industrial breakthroughs. This has led Germany to be one of the top exporting nations. After reuniting in 1990, Germany has experienced continued growth while industrializing the eastern portion if its nation. Germany joined the European Union in 1999 and converted to the Euro as its main currency shortly thereafter.
Although the automobile industry has been a drag during the recession, its machinery and technology exports have fared relatively well. Forecasts have placed Germany among the quickest to recover from the recession with expected GDP growth of about 2% in 2010.
As all signs continue to look positive, what will be the thorn in Germany's side for years to come? Greece, Italy and Spain.
Those three countries are all facing issues with government issued debt. Greece was recently downgraded by rating agencies Fitch and S&P. Italy must be high on their watch list with over 120% of government debt to annual GDP. Spain's economy is retracting at a 4% rate and 13% unemployment, with no global competitive advantage to use as protection.
The common link is the European Union (EU). As mentioned in the article about Ireland, the EU forces restrictions on its member countries. As risk of the weaker countries increases, willingness of the market to lend these countries money to continue operations will be tougher. This puts Germany in bed with its weaker neighbors. Why?
As the cost to issue debt for these countries continues to increase, the EU will pressure stronger nations to lend at lower rates. Abu Dhabi of the United Arab Emirates had provide up to $10 billion to support Dubai in its time of crisis. Germany's Chancellor has already mentioned there have been talks to provide similar bridge funding if these countries continue weaken. Certainly, this is good for the weaker players in the EU, but it restricts Germany from using the money for projects with a higher return or risks loss on their investment.
In order for these countries to succeed on their own, most economists think they would need to eliminate their ties to the EU, add liquidity to their system, and weaken their currency to cover interest payments. In a time of crisis, doing this would only add to the fear in these weaker EU economies. This option, though on the table, seems to be a far stretch.
Along with every scenario, there is a good side for Germany. Since the downgrade of Greek government debt, the Euro has weakened over 6% to the dollar. As the Euro weakens, it makes Germany's specialty, exports, cheaper for non-Euro countries to buy.
All looks bright in Germany for now, but if a loan is made to these weaker countries, they will suddenly have a ball and chain dragging on their growth.
http://www.examiner.com/x-28053-Huntsville-Economy-Examiner