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  • German Exports Set to Hit Record High

    There seemed to be no bright lights for European economies in 2012. But perhaps we were not looking closely enough at what was happening in some of the EU's stronger economies, like Germany. While we were watching Angela Merkel and German citizens struggle with how debt crises in Greece and Spain and Italy would affect everyone in the Euro Zone, German exports, apparently, were doing quite well. From Der Spiegel : In the first 11 months of 2012, exports grew 4.3 percent to €1.018 trillion ($1.335 trillion), the Federal Statistics Office said. Stagnant sales to the rest of the European Union contrasted with a 10.4 percent jump in exports to non-EU nations. Separately, the Federation of German Wholesale, Foreign Trade and Services (BGA) said it expects the value of exports to have reached €1.103 trillion in 2012 as a whole, a four percent rise over 2011, when they exceeded the €1 trillion level for the first time. It also forecast slightly stronger export growth of 5 percent in 2013, to €1.16 trillion. Still, exports weakened at the end of 2012, pulled down by slumping demand in Europe, Germany's biggest market. Some key questions emerge from this report: 1) What does this tell us for the overall global impact of a declining Europe? 2) What role does the weakened value of the euro play in increasing sales of German exports in the U.S., Brazil, China? 3) What might the impact of continuing growth of German exports be on other European economies? Read the full article here .

  • Rogoff on Greece's Future in the EU

    Following the announcement of the €130 billion ($171 billion) bailout of Greece, Der Spiegel interviewed Harvard economist Kenneth Rogoff . Like many economists, Rogoff believes Greece's leaders have a lot of work still to do. And he is firmly in the more austerity camp. He told Der Spiegel that he would recommend "The government in Athens should be granted a kind of sabbatical from the euro." In Rogoff's plan, Greece would still be in the EU, but out of the monetary union--at least until the country can lower its debt burden. Otherwise, he is not particularly optimistic that Greece will be able to remain in the EU. SPIEGEL: If Greece were to leave the euro zone, a wave of panic might engulf other countries struggling with debt, such as Portugal. How can we prevent the contagion from spreading? Rogoff: If Greece leaves the euro, the markets will demand sensible answers to two questions. First, which countries should definitely keep the euro? And second, what price is Europe prepared to pay for that? The problem is that the Europeans don't have convincing answers to those questions. SPIEGEL: What advice would you give Merkel and her counterparts? Should they tear the euro zone apart? Rogoff: No, certainly not. We are talking about bending not breaking, with one or more periphery countries allowed to leave temporarily in order to enjoy greater flexibility. There is currently no simple solution for this unparalleled crisis. The big mistakes were made in the 1990s. SPIEGEL: Does that mean the whole idea of the euro was a mistake? Rogoff: No, a common currency for countries like Germany and France was a reasonable risk, given the political dividends. But it was a grave mistake to bring all the south European states into the euro zone purely for reasons of political union. Most of them were not ready for it economically. SPIEGEL: That may well be, but the fact is that now they are part of the monetary union, and that can't simply be unravelled. Rogoff: Which is why there is only one alternative: Either the euro completely collapses -- with all the catastrophic consequences that would entail -- or the core members of the currency union manage to turn the euro zone into a genuine political union. Read the full interview here .

  • Linde CEO Reitzle: EU's Debt-Ridden Economies Should Push Through Reforms, or Germany Must Consider Withdrawing

    Der Spiegel has a fascinating, and at times provocative, interview with Wolfgang Reitzle , one of Germany's most prominent and respected business leaders. Reitzle argues that, while he does not expect the euro zone to fall apart, he believes that the EU's leading economies, Germany in particular, need to draw some clear lines to prevent policy makers from doing too much to protect the currency. And he, like so many Germans worth a fraction of his wealth, is tired of feeling like his country has to keep propping up Greece and Italy. Here is an excerpt from the interview: SPIEGEL: Are you saying that withdrawing from the monetary union would be advantageous for Germany? Reitzle: No, but I believe that the German economy would have weathered such a shock within a few years, and would even become more competitive in the long run. To put it clearly: I don't think this scenario is desirable, but it also shouldn't be declared a taboo. And from a personal standpoint, I don't agree with a large share of my taxes ending up in countries that don't manage their economies responsibly. SPIEGEL: At the moment, the German economy is actually benefiting from the crisis. The weak currency and low interest rates act like an economic stimulus program. Reitzle: And we need this prosperity, because it's inevitable that we will be presented with the bill for the euro in the end. But this imbalance in the euro system must be corrected in the long term. The debt-ridden countries don't just have to reduce their debts. They also have to revamp their economies… SPIEGEL: …which is difficult, if not impossible, because they lack their own currency to devalue. Reitzle: And that's why the lack of competitiveness in the euro zone has become practically set in stone. If Italy still had the lira, it would have been devalued long ago to make the country competitive again, because wages there, as in Spain and France, have risen far too quickly -- in sharp contrast to Germany, by the way. SPIEGEL: But all of this shows that the euro brought together things that don't belong together: highly developed, industrialized nations and agricultural countries… Reitzle: …as well as different mentalities. And, most of all, countries that are dissimilar in terms of efficiency. It is evident that the euro was introduced far too soon. In retrospect, anyone can come up with the perfect explanation for why all of this couldn't possibly work. But that doesn't do us any good. Now we have to see where we stand and what steps to take so that everything doesn't fall apart. There's more to it than just muddling through. Germany is being given the leading role here, whether we like it or not. Not everyone ticks the way the Germans do, but sloppy economic management will no longer be tolerated. There will still be substantial differences, just as there are in the United States of America. SPIEGEL: Do you see the United States of Europe as a goal? Reitzle: Yes, in the long term. In 2050, the United States will still be a global power and China will probably be the dominant economic power. Europe will only be able to keep up if it manages to achieve a political unification process in addition to the monetary union, and if it includes Russia. However, if we even mess up the monetary union, Germany will be an attractive island, just as Switzerland is. But will we be relevant in the world anymore? Probably not. That's why it's worth doing everything we can. Read the full interview here .

  • Der Spiegel Sounds the Alarm on Protectionism

    Thanks to Barry Ritholtz , the graphic below from the German paper Der Spiegel caught our eye. It is a strong illustration of the growing global trade imbalances: The bipartisan push in the US House of Representatives to respond to China's apparent ability to manipulate currency markets has been big news globally, and clearly caught the attention of Der Spiegel: The trade conflict between Beijing and Washington has thus entered a new, acute phase. One month before the high-stakes mid-term congressional elections, America's representatives, alarmed by nearly 10 percent unemployment and a gloomy economic outlook, have rediscovered an old friend: protectionism. At the same time, they have pointed the finger once again at their favorite enemy: China. They are demanding that China finally adjust its currency so that Chinese products are no longer much cheaper than those manufactured by its US competitors. Things are heating up in the conflict between the US and China: verbally, legally and politically. The economic power of the 20th century wants to cut the 21st century's economic giant down to size. The question is whether it is even still strong enough to do so -- and whether such a conflict won't end up harming everyone. For a long time, the US economy has been dependent on cheap products made by the Chinese and on their currency reserves that bolster the value of the dollar. Until now, both sides have benefited from this system. One side lived beyond its means and paid with printed pieces of paper called dollars, the other side used this paper to purchase US government bonds, allowing it to accumulate huge currency reserves. But things can't continue like this forever. Imbalances in world trade are growing increasingly large, and the global currency system is getting out of control. Read The Specter of Protectionism: World Faces New Wave of Currency Wars here .