As US outperforms expectations, Germany drives Europe’s problems with slowing economy – Firstpost
In a sign of difference between the trans-Atlantic economies, while the United States outperformed expectations, Germany emerged as the weakest in the 27-member European Union (EU).
Germany’s gross domestic product (GDP) grew at a rate of mere 0.3 per cent in the second quarter of 2024 whereas production entered a period of contraction and fell by 0.1 per cent, according to the figures released by EU’s statistics agency Eurostat.
On the other hand, the US economy grew 0.7 per cent in the second quarter from the first quarter or at 2.8 per cent on an annualised basis, as per the Associated Press.
This might not be the end of Germany’s economic woes as economists have predicted that the economy could worsen in the year. Sebastian Dullien of the IMK Institute said that no turnaround is in sight for Germany.
“The German economy has not grown for almost two years and there is no turnaround in sight. The weak fourth quarter of 2024 points to a weak start in the new year — the best-case scenario for the first quarter is minimal growth. There is even the risk that the German economy shrinks further,” said Dullien to Reuters.
Is Germany the sick man of Europe?
Once hailed as an economic behemoth of Europe, Germany is now more aptly described as the sick man of Europe.
With barely any growth and no turnaround in sight, Germany is facing a slew of problems. The DW News noted that the country is facing high inflation, high interest rates, low demands for its exports, and a series of exports.
However, Germany is not the only European nation with a weak economy. While German growth is barely afloat, the French economy has also been reported to be stagnant and Italy, the EU’s third-largest economy, grew by just 0.7 per cent. On the other hand, Spain, the EU’s fourth-largest economy, registered a substantial 2.5 per cent growth.
How is US growing when Europe is not?
There are some fundamental differences between the economic realities of European nations and the United States that have led to these starkly different results.
In the United States, consumers are spending freely and the federal government is spending much more on business development, renewable energy production, semi-conductor production, and infrastructure growth. These factors are contributing to growth in the United States.
Such trends are not there in the EU member-states. In Europe, consumers are saving at record levels and governments have started restricting spending to reduce budget deficits, noted AP.
“The outperformance of the U.S. is largely due to strong private consumption and domestic investment. Fiscal policy support was higher in the U.S. than in other advanced economies, overall spending 25 per cent of GDP,” said Thomas Obst, senior economist at the German Economic Institute in Cologne, to AP.
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