This article is from:Interface News, Contributing Author :Qian Boyan, title map from: Visual China

Unexpectedly, most European economies “missed” a technical recession.

In the third quarter of the key economic indicators released by the German Federal Statistical Office on November 14, the most dazzling is the GDP data with a growth rate of only 0.1%.

As the Bureau of Statistics announced on August 14 that the second quarter GDP contracted by 0.2%. According to the definition of economics, if there is a negative growth in GDP for two consecutive quarters, it is called a technical recession.

The last time Germany experienced such a sluggish growth was at the turn of 2012/2013, when the European debt crisis continued to ferment. In the past two years, the “Eugly Pig Country” Italy, which had a technical recession in the G7, was only at the end of 2018.

What happened to the German economy that once crowned Europe? Where is the core problem?

The quarterly economic growth rate of Germany, the Eurozone and the world since 2017. Source: German Business News

Attacked European locomotive

At first glance, for the old European countries whose economic growth rate is below 1% per year, the occasional fall into the negative growth zone is not the end of the world. But at least for the European locomotive Germany, the stereotype of slow economic growth is not entirely correct.

Data Source: World Bank, statista

Since the 2008 financial crisis, the euro-denominated German GDP has risen from 2.45 trillion euros to 3.34 trillion euros in a decade, equivalent to an increase of 36.7% in the decade or an average annual increase of 3.2%.

The impression that the European economy has lost for ten years is mainly due to the dollar-denominated GDP data amplifying the long-term decline of the euro against the US dollar, but for the euro zone where the CPI remains below 1% per year(Germany) Residents, the decade after the financial crisis is indeed a decade of sustained growth in purchasing power.

This is also the longest period of economic growth in Germany since the post-war “Rhine economic miracle” of the 1950s and 1960s.

However, good days are probably coming to an end.

In fact, Germany’s economic growth has actually stagnated for more than a year. As early as the fourth quarter of 2018, Germany’s GDP has recorded a negative growth of -0.1%. Only with the stimulating effect of warm winter, the 0.5% growth in the first quarter of this year successfully saved the face of the German economy on paper.

This trend has also been confirmed by the German government. On October 17, Economy Minister Artemier lowered Germany’s projected GDP growth rate in 2020 from 1.5% in April to 1.0%: the economic growth rate for the whole year of 2019 was also lowered to 0.5%. The figure at the beginning of the year is still 1.8%.

Not just dry GDP data, in fact almost all macro data pointed out the direction of the German economy: down.

According to the Daily Mirror, Germany’s exports fell to its lowest level since the beginning of this year in August; Germany’s ranking is also ranked third in the world in the World Economic Forum’s global competitiveness rankings. It fell to the seventh.

The current ten-year German government bond is only 0.25% higher than the two-year national debt, and the last two yields are so close to 2008; the two major economic institutes in Germany and ifw and the business of ifw The boom data also fell to its lowest point since 2009.

ifo’s business climate index continues to hit new lows. Source: German Business News

At the enterprise level, the situation is even less optimistic.

Since the first quarter of this year, almost all well-known German companies have announced that they will cut their full-year profit or revenue expectations, and even many companies directly announce layoffs. According to a study by Ernst & Young, 54 of the 308 high-profile companies listed on the Frankfurt Stock Exchange have announced a downward revision of their annual performance indicators, the highest since 2009.

BASF, the world’s largest chemical company, has cut its earnings forecasts twice and announced a global layoff of 6,000 people. The German Chemical Industry Association is expected to reduce the total revenue of the German chemical industry by 5% this year.

Volkswagen, the world’s largest auto group, global sales fell 2.8% in the first half of 2019, and global sales in October fell 5.3%.

Siemens, the world’s largest industrial company, announced that it will split the group in the middle of the year, essentially abandoning the largest oil and gas generation group currently in revenue, which means that the number of layoffs will be determined to exceed 10,000.

德The National Machinery Industry Association also expects German industrial output to fall by 2% for the full year of 2019, while orders may fall by more than 9%.

“I know very well that now those auto engineering consulting companies and component manufacturers have actually frozen their recruits,” Schulz, a senior engineer who has worked for AKKA, a well-known car service consulting company, for more than 30 years, told the author. “It’s not easy to make existing employees work when there is no OEM order, not to mention that the company can now outsource simple R&D work to countries with low labor costs such as Portugal or Romania.”

Similar pessimism also comes from car host manufacturers. “Now the budget of each department is relatively tight. In the past, only the approval of the leaders at the two levels required basic projects. Now there is no approval from the level of leadership under the board of directors.” At the headquarters of Ingolstadt Audi. Roholiz told the author.

Audi has cancelled the night shift of the plant on November 13th, and most of the outsourcing projects in the R&D department are also undergoing a wide range of exchanges. The only purpose is to change one of the cheapest outsourcing companies.

Structural dysentery of “Sick Europeans”

As early as late August of this year, many German media and economic research institutions attributed the negative growth in the second quarter to the external factors of Brexit and the data distortion caused by the high base in the first quarter caused by warm winter.

But these reasons seem to be difficult to stand up.

As of November 14, some Eurozone countries, which are also affected by Brexit and warm winter, have released third-quarter data, but they have not shown the general weakness of the German economy. Among them, France and Spain increased by 0.3% and 0.4% respectively, and the UK, which suffered the most from the Brexit, also increased by 0.3%, even Italy, which recorded a 0.1% increase.

If France and Spain increase their 0.2% and 0.5% growth in the second quarter, Germany, which is known as the European economic engine, is even more unworthy.

The nickname “Sick Man of Europe” may be more suitable for the current German economy. In fact, this title has appeared in a research report of Credit Suisse in October.

From the economic locomotive to the new European sick, compared to the economic cycle fluctuations and the external market environment, the biggest hidden danger of the German economy is still its deep-rooted structural problems.

OverThe dependence on export-oriented, relatively single industrial structure and the serious lack of competitiveness of new industries are the three major problems affecting the long-term development of the German economy.

With its strong industrial strength and the EU Customs Union market, Germany has been one of the world’s strongest trade surplus countries since the fall of the Third Reich. According to the estimates of the Ifo Economic Research Institute, Germany’s trade surplus will reach 276 billion US dollars in 2019, equivalent to 7.1% of Germany’s annual GDP, ranking first in the G7 for many years.

But the shortcomings of Germany’s export-oriented economic model relying heavily on foreign trade’s double-edged sword are also obvious: Germany is particularly sensitive to the global trade war, the needs of the two major countries and the UK’s Brexit and other negative factors.

The United States and China are Germany’s first and third largest trading partners respectively, and the Chinese market also accounts for about 15% of the revenue of the 30 Dax index companies on the Frankfurt Stock Exchange. As for Germany’s fourth largest trading partner, the UK, the country’s enterprises in the first quarter due to the deadline for the Brexit deadline of March 31, directly in the first quarter of Germany’s GDP growth to 0.5%, also led to Growth in the second and third quarters was relatively weak.

However, the German economy’s sluggishness cannot be attributed to external factors. After all, the Netherlands, which is also known for its exports, has no signs of a technical recession.

The structural problem inherent in Germany lies in a single industrial structure. Different from FranceStrong aircraft manufacturing, nuclear power technology, cultural tourism industry and even agriculture, or the United States has a multi-faceted country of IT industry, military industry, cultural and entertainment industry, Germany’s three axes are machinery manufacturing, automotive and chemical industries.

As the chemical industry accounts for about 20% and about 30% of the machinery manufacturing revenue comes directly from the automotive industry, the automotive industry can be said to be the lifeblood of the German economy.

Since the fourth quarter of 2018, automobile sales in all regions, including China, the world’s largest auto market, have experienced continuous decline. The pressure of public opinion campaigns on the global internal combustion engine has further squeezed the recession. Market.

There is still limited development in Germany in the field of electric vehicles that are being advertised as a way of moving in the future. Even though Porsche and Volkswagen have launched Taycan and ID3 respectively, there is still a long way to catch up with Tesla and enter the mass market.

As for the IT industry that can maintain rapid growth this year and the food and clothing industries promoted by domestic demand, German companies in these fields are lacking. Since Deutsche Bank announced more than 10,000 layoffs in July this year, the Germans have also substantially withdrawn from the world financial arena; the pharmaceutical industry represented by the Bayer Group has long lost the courage to challenge Swiss pharmaceutical companies such as Roche and Novartis. .

This is another far-reaching structural issue that the Germans are worried about: Germany has avoided the wave of old-fashioned companies like the US rust belt, but there has not been a wave of emerging companies like Silicon Valley.

There are no German companies in the top 20 list of world technology companies’ valuations; there is still no consumer-oriented technology company among the 30 Dax index companies. Germany and the two largest software companies in Europe are SAP and Siemens, all of which serve industrial enterprises. The largest venture capital firm in Germany, Rocket Internet, is equally unknown in the world.

Even the Minister of Economy, Altemeier, announced on October 28 that he would join France with the European cloud system Gaia X to recapture digital sovereignty from the Americans. But Sabine Bendiek, head of Microsoft’s German division, “the basis of digital sovereignty is technical ability” is not only to pull orders for Microsoft, but more like ridiculing the Germans do not have enough cloud technology strength.


The beginning of Japaneseization is still a short-term pain?

Stop economic growth means a decline in people’s well-being?

At least the current data does not support this conclusion. Either the unemployment rate, fiscal revenue or stock market index gives a completely different answer.

As of the end of October, the unemployment rate in Germany was 4.8% and it is still declining. The most economically strong Bavaria is only 2.3%; full employment has also boosted the Treasury’s fiscal revenue, the first three quarters of this year. Germany’s fiscal revenue grew by 3.1% year-on-year, reaching a staggering 539.6 billion euros and hitting a record high; the Dax index, which has reached 13,280 points, also hit a record high, while the Dax index was still below 11,000 at the beginning of this year.

Compared with the high unemployment and high inflation in the 1970s, the current economic stagnation seems to be harmless to humans and animals.

For this reason, the Merkel government has so far explicitly rejected large-scale economic stimulus policies.

Minister of Finance (Olaf Scholz) is the most representative: “China’s economic situation is still good, does not exist Any form of (government) intervention is required. It is now a weak period, not a recession.” Muertz believes that the government has passed 2019 The effective tax cuts have stimulated domestic demand, which directly contributed 0.7% of the economic growth rate. The Ministry of Finance also expects the German economy to resume growth of up to 1.4% in 2020.

However, it is difficult for Mulz to get much approval in the economics or media circles.

“How long does the federal government continue to ignore these warning economic signals?” German Labor Bureau Chairman Kahn Peter (Steffen Kampeter) Say loudly: “If you continue to postpone the necessary investment, it will endanger the status of Germany’s economic power.”

In the view of economic research institutes such as ifw and iw, the federal government should cancel the anachronistic fiscal balance policy, otherwise Germany may face a situation of Japaneseization: near-zero economic growth, severe population aging, and actual negative interest rates. The central bank and the stagnation of new technology research and development capabilities.

More importantly, Merkel’s big coalition government lacks the initiative of economic reforms when employment rates and fiscal revenues are ideal. Everything is more like cooking frogs in warm water.

Even if it’s pretty good data, it doesn’t tell you everything. The rising stock market is mainly due to the European Central Bank’s negative interest rate policy. The actual negative interest rate of bank savings rate, negative interest rate of government bond income, and German housing prices that have been mad for ten years will increase the number of resident deposits. Entering the stock market; the repeatedly low employment rate is mainly benefited from severe aging. Due to the existence of strong trade union power, the unemployment rate is only a serious economic indicator.

Behind the good core data and fiscal surplus, the German government is under-investing in new technology research and development. Germany is one of the five countries in the 36 countries of the OECD that do not have a tax reduction policy for research and development fees. It is also one of the developed countries that ranks in the bottom of the digital indicators such as 4G coverage and network speed.

In contrast, the German government’s emphasis on tax cuts is more about consumption-consuming spending, rather than real investment.

Like the European Central Bank, which maintains a negative interest rate policy, if there is another major event similar to the 2008 financial crisis, it’s close to how the Germans who are smashing bullets and will only continue to stimulate short-term consumer demand. response?

This article is from:Interface News, Contributing Author :钱伯彦