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Sun Nov 2, 2014, 10:31 AM

Germany’s flagging economy: Build some bridges and roads, Mrs Merkel

This is an interesting article, particularly since it comes from a center-right publication, The Economist, that has typically been critical of President Obama and Democrats efforts to stimulate the U.S. economy out of the deficit through deficit spending. Yet, compared to most European countries, the U.S. economy is now in much better shape and far better shape than countries that Republicans have hailed as examples that the U.S. should follow, such as Ireland with its low corporate taxes.

This just goes to show the Republican tilt of our corporate media. You get glimpses of the truth when you look at countries abroad, but can you imagine the Economist applying the reasoning below to an analysis of economic visions offered by Republicans versus Democrats. It would conflict with narrative that Republicans are better on fiscal policy, even though they aren't.


FOR the past few years Germany has been a shining exception to Europe’s economic weakness. But suddenly the Teflon Teuton is in trouble. Germany’s GDP fell in the second quarter and more recent news has been grimmer still. Industrial output and exports plunged in August. The ZEW index, a measure of investor confidence, has tumbled to its lowest level in almost two years. The economy may well be in recession

This weakness has many outside Germany deeply worried. But inside the country the reaction is one of stoic nonchalance. Even as the government this week slashed its official growth forecasts from 1.8% to 1.2% for 2014, and from 2% to 1.3% for 2015, it argued against any shift from the long-standing goal of balancing the budget next year. “A dip in growth is not a cataclysm,” says Sigmar Gabriel, the economy minister; there are “no economic-policy grounds” for changing course.

Good politics, lousy economics
Politically, this position has a certain logic (see article). The promise of no government borrowing in 2015 was at the heart of Angela Merkel’s election campaign. Sticking with it is popular with German voters, who see deficits as dangerous, ineffective and probably immoral.

Economically, the logic is feeble. Obsessing about a balanced budget in the teeth of recession is risky. Fiscal stimulus, focused on infrastructure investment, would leave the country safer in the short term and able to grow faster in the long term. And it would not break the country’s fiscal rules.

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Reply Germany’s flagging economy: Build some bridges and roads, Mrs Merkel (Original post)
TomCADem Nov 2014 OP
CJCRANE Nov 2014 #1

Response to TomCADem (Original post)

Sun Nov 2, 2014, 12:57 PM

1. The sanctions against Russia are having an effect. Germany did a lot of trade with them.

Take that trade out of the equation and you're going to get a big gap in the economy.

However, I do agree with targeted stimulus and infrastructure spending in general as a good way to keep the economy going in a downturn.

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