Sovereign Debt Crisis Slows the German Economy

The sovereign debt crisis in the Eurozone has already had a detrimental effect on the German economy. Exports to Eurozone countries are falling, though soaring exports to emerging economies have so far more than compensated for this. Moreover, investment in Germany is on the decline. Consumption is still benefiting from what have so far been positive developments in the labour market. In view of this, the German economy will grow by 1 percent in 2012. An ongoing weakness in investment activity, a temporary flagging of the stimulus from export trade and a levelling off of consumer dynamism are slowing the pace of growth in Germany. In 2013 real GDP will rise by only ¾ percent. In the course of 2013, though, investment will pick up and a reviving global economy will bring new impetus to the German economy. Here, however, job growth and the reduction of unemployment will come almost to a standstill. The unemployment rate will persist at the current 6 ½ percent. Despite weak economic growth in this year and the next, Germany will have an almost balanced national budget.

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