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German economy – the calm before the storm

A German economy appears to be in brilliant condition. In the last year with an merchandise exports worth €1 205.5bn and merchandise imports worth €954.6bn Germany reached a banner €252.9bn foreign trade surplus. Thereby, it enhanced its – even then –excellent result from the 2015, when it ran tangible trade surplus of €244.3bn. German trade excess is, in terms of per capita, around 14 times bigger than the trade overhang of another great export power, that is the Chinese economy. Amid the leading global economies solely Switzerland achieves better results in trade excess per capita. As well, the Germany’s current account balance surplus attains levels unprecedented in its history. So far, we still do not have data for the 2016, nonetheless we know that in 2015 the German economy had an overhang in the current account balance at the level of 8.5-8.8% GDP, whereas as far back as  2000 the same indicator was merely -2%.

Such a large trade overhang is an object of jealousy from many states all over the world and, unquestionably, attests to a very high competitiveness of German enterprises – both these small, middle (i.e. so-called Mittelstand sector) and the largest global corporations. Yet, the German political, industrial and financial elites are extraordinarily disconsolate and upset, though they do not often give voice to it publically. There are three quintessential issues that makes German leaders not sleeping calmly. These questions, in the sequence of their significance, are as follows:

  1. a disastrous state of the two biggest and flagship German banks – Deutsche Bank and Commerzbank, which feeds through all the German banking sector;
  2. a threat of Eurozone and the European Union breakup;
  3. an increasing probability of radical turn in international trade towards protectionism on global scale.

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