Germany Weathers World Economic Turbulence

August 27, 2015Germanyby EW News Desk Team

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Despite the troubled waters of the world economy, Germany continues to outperform its fellow EU nations, with consumer confidence, exports and public financing all on the rise. German GDP grew 0.4 percent in Q2, a rise from 0.3 percent from the previous quarter.

Germany also benefits from a positive job market as well as a high business morale not seen in over a year. This confidence has extended into the manufacturing sector, reaching its highest output in more than a year. Overall, Germany has a record low unemployment rate, including low borrowing costs that have helped stimulate the economy. Further, data suggests that the EU's largest economy will continue to prosper throughout the year.

Chinese Economy

Germany may be in a better position than most EU economies, but its fate still ties to the world economy, especially when China is involved. China's instability and the Greece situation are outside factors that could hurt German growth, but a strong domestic economy that provides a buffer against the perils of international markets help Germany.

With that, Germany may face hurdles in the future if Chinese economy further tumbles because China is Germany's third largest trading partner. The China factor will not cripple German exports, but it can negatively affect Germany's stellar export record. In addition, China's devaluation of its currency against the US dollar spells an uncertain future that has German authorities worried.

The Greek Crisis

Like China, Greece is another nation that can affect Germany's future, but the Germans hold all the cards. For one thing, many investors who are nervous about the Greek situation have turned to German bonds, allowing the government to save over a $109 billion in borrowing costs. The interest savings incurred from 2010 to 2015 is responsible for over 3.0 percent of Germany's GDP.

Germany also stands to benefit from Greece defaulting, as investors looking for investment protection would flock to German bonds in droves. When compared to US or French bonds and the Greek fallout, Germany has gained the most from the bond market, and German Finance Minister Wolfgang Schaeuble stated that the interest savings from the Greek crisis is one reason why the Germans have attained a balanced budget.

Germany has also been a leading force in pushing austerity reforms on Greece, keeping the southern European nation in a perpetual cycle of poverty and loan dependence. Greece needs another bailout, its third bailout since 2010, an unpopular sentiment that led to the resignation of Prime Minister Alexis Tsipras in August.

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