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Material

Jack Ewing: Germany Nears Recession and Chinese Factories Slow in Trade War Fallout (2019)

In ominous signs of the damage being done by the trade war between China and the United States,

data released on Wednesday indicated that the German economy was hurtling toward recession and

that growth at Chinese factories was slowing at a pace not seen in nearly two decades. [...]

It is not surprising that China and Germany are stumbling under the weight of the trade pressures.

5 China is the world’s largest exporter of goods and services, just ahead of the United States. Germany

is No. 3, and exports account for almost half of its gross domestic product. Both countries have been

hit directly by Mr. Trump’s tariffs¹, and more broadly by the disruption to the global economy that the

trade conflict has caused.

Germany is also under stress from Britain’s chaotic attempts to leave the European Union, while

10 tensions in the Persian Gulf have unnerved² company executives about sales prospects in that

important region. As a result, they are reluctant to invest in new buildings or factory space in

Germany.

United States tariffs have mostly been directed at China, but the Trump administration has also

imposed levies³ on European steel and aluminum. Mr. Trump has often threatened to impose tariffs on

15 German cars.

The data [from] Wednesday suggested that the German auto industry was hurting plenty.

Automobiles, Germany’s biggest export product, are a prime example of how the country has been

caught in the trade crossfire between the United States and China. [...]

Germany’s economic performance was the worst of any eurozone country during the second quarter,

20 separate data from the European Union statistics agency indicated. Even Italy, the economic

laughingstock⁴ of the eurozone, did slightly better than Germany – its growth in the quarter was zero.

That is a humbling experience for Germany, which has long lectured other countries on how to

manage their economies and scolded⁵ them for having too much debt.

Germany was among the first European countries to bounce back from the debt crisis that struck the

25 eurozone in 2010, and its unemployment rate, at 3.1 percent, is still the lowest in the zone.

Any schadenfreude elsewhere in Europe is likely to be short-lived. German automakers and other

manufacturers buy many of their components from countries like Italy, the Netherlands or Poland.

Germany accounts for more than a quarter of the European Union economy. It is virtually impossible

for the region to thrive⁶ when Germany is ailing.

30 The slumping growth will probably increase calls for Chancellor Angela Merkel’s government to

increase spending to stimulate the economy. That will be politically tricky. Germans pride themselves

on fiscal prudence⁷, and the government has recorded budget surpluses for the last five years.

Economists say the country should take advantage of record low interest rates to invest in

infrastructure such as its aging rail network, in education and in research and development. German

35 government 10-year bonds⁸ were commanding a yield⁹ of minus 0.65 percent Wednesday, meaning

investors are effectively willing to pay Berlin to keep their money safe.

The decline in economic output and the weak outlook “increasingly add to the economic case for a

dose of fiscal stimulus,” Oliver Rakau, chief German economist at Oxford Economics, said in a report

Wednesday.

Jack Ewing: Germany Nears Recession and Chinese Factories Slow in Trade War Fallout, in: New York Times, 14.08.2019, URL: https://www.nytimes.com/2019/08/14/business/german-economy.html (abgerufen am 22.02.2020).

¹ tariff – tax on exports or imports

² to unnerve – to make someone lose courage or confidence

³ levy – Abgabe, Steuer

⁴ laughingstock – figure of fun

⁵ to scold – to rebuke, to reprimand

⁶ to thrive – to boom, to grow

⁷ prudence – here: austerity

⁸ bond – Anleihe

⁹ to command a yield – Rendite abwerfen

German fiscal policy

1

Summarize the article. (Material)

[30 BE]

2

Analyze economic and social effects of German “fiscal prudence” (Material) in times of low economic growth.

[45 BE]