Powerful growth in Germany fuels calls to share the wealth

AFP/APP: Strong growth data in Germany came as welcome news Thursday for politicians haggling over spending and unions battling for more pay, although observers warn the good times can’t last forever.

Gross domestic product in Europe’s top economy grew by 2.2 percent in 2017, the fastest rate since 2011, according to federal statistics authority Destatis.

The performance, in line with forecasts from leading economic think-tanks and the OECD, was driven by a sharp pick-up in growth in investments and exports.

At the same time, expansion in private and government consumption slowed compared with 2016.

Overall, growth was almost one percentage point higher than the 1.3-percent average recorded over the past 10 years.

Germany also notched up a record government budget surplus of 1.2 percent of GDP, Destatis said.

It was “a strong performance by an economy firing on all cylinders,” commented ING Diba bank economist Carsten Brzeski, arguing that the same factors that have favored the economy will stay in place over the coming year.

Defying fears of a new era of protectionism after the US election of Donald Trump, exports grew by 4.7 percent in 2017, compared with 2.6 percent the previous year.

Meanwhile, historic low interest rates set by the European Central Bank, a euro that has not strengthened against other currencies in step with the continent’s economic recovery, high levels of employment and a broad-based upturn across the 19-nation Eurozone all favor continued expansion for Germany.

But the picture is not entirely rosy for Berlin, Brzeski warned.

“Strong growth performance has led to reform complacency. Under the surface of strong growth, deficiencies in areas like digitalisation, services and education have emerged,” he said.

“The next government still has the unique opportunity to tackle these challenges in good times and not wait until the bad times have started.”