Francesco Saraceno | I share with Donald Trump the belief that Germany is harming the world economy. (Ok, ok, it is not bad Germany, it is bad German trade. ). Yet, I think it is worth pointing out something trivial that is not emphasized enough. Trump is right about Germany, but for the wrong reasons. The problem is not the number of German cars circulating in the US, but the number of American cars not circulating in Germany.
The damping of the refugee crisis and the strength of the economy have weakened German voters’ desire for a radical change. If Angela Merkel is re-elected as chancellor, the financial markets are likely to function normally.
A political risk scenario is not taking shape in Europe, but that doesn’t mean there are no problems. They are still there and in France they will rear their head under the concept of “cohabitation.” The new president of the French Republic, more than likely, will have to live with the National Assembly being dominated by the traditional parties.
With a very low jobless rate (5,8%), Germany is growing for the eighth year in a row. This is allowing it to attract capital and qualified workers. Even so, the future of the jobs market is a concern, and a key issue in this Autumn’s elections.
Inmigration in Germany is not a new topic. The country is the second most popular migration destination in the world, after the United States. In fact, some 11 million of the people currently living in Germany were actually born elsewhere. The controversial refugee movement and last poor German demographic trends published make immigration resurface as an opportunity to boost German’s potential growth.
Recently there’s again been talk of a two-speed Europe. During the mini-summit two weeks ago, Merkel, Hollande, Italy, Rajoy, gave the green light to this latest spin. The Spanish PM has said the country would be at the nucleus of this.
After the restructuring Santander carried out in Spain in 2016, the bank could be planning to improve efficiency in other countries, including Germany. Although the project is in an initial phase, it would obtain cost savings of about 15%.
Spain can’t imitate Germany in a context in which Europe is a closed zone where countries export to each other. And Spain is unlikely to become another Germany because the Spanish production model is still based on low productivity.
Brussels has warned Germany about its excessive current account surplus. The procedure for detecting macroeconomic imbalances has revealed the average current account surplus between 2013 and 2015 was 7.5% compared with an alarm threshold of 6%.
“…One of the reasons for the high level of youth unemployment in Spain has to do with the fact that companies hardly get involved in the dual training system,” explains Hermann Simon the chairman of Simon-Kucher, the preferred consultancy firm of the “hidden champions,” those German mid-cap companies which compete globally. “Spain’s level of innovation is very weak…the whole country cannot live just off tourism services.”