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The downsides of German growth

Fri, Aug 20 2010 11:20 CET

byBenjamin Cunningham - The Prague Post

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The downsides of German growth

German chancellor Angela Merkel has reason to smile

The German economy grew at a rate of 2.2 percent in the second quarter of 2010, and while that is good news for Frankfurt bankers and the government of Chancellor Angela Merkel, a growing list of economists say that growth is coming at the expense of the rest of Europe.

"It is wrong to argue that Germany is the growth engine of the European economy, which is what we have seen argued in recent days," said Simon Tilford, chief economist with the Centre for European Reform, a London-based think tank. "It is right to argue that it is a drag."

This year's German trade surplus topped $ 77 billion through May, about 60 percent of that occurring within Europe. Restrained German wage growth - which actually declined in 2009 and is forecast to do so again in 2010 - made goods particularly competitive on international markets and spells bad news for European neighbours, like the Czech Republic, who seek to sell goods to German consumers, Tilford says.

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