It should come as no surprise to wake up to another bail out for Greece. Not to do so would spell the end of the entire global financial system after all and the Greek government knows this. Neither should the continuing and worsening crisis in Portugal raise any eyebrows and rest assured in a couple of months it is Italy’s inevitable turn but most people will be flabbergasted at Germany’s stalling economy. They shouldn’t be.
The financial crisis was brutal for Germany, but the recovery was steep, and in 2011, the gloating started. They called it the German “success recipe,” a system that was somehow superior to any other. It would keep the economy growing even as Eurozone mayhem was breaking out all around. That optimism has endured, and stocks have hit new highs in May, but the German economy has diverged sharply from that scenario.
A key element in that “success recipe”- much to the chagrin of Germany’s beleaguered neighbors – is the relentless drive to export. The whole political and economic machine is geared that way. Foreign policy decisions are made on that basis. As are domestic policy decisions. In return, the economy has become dependent on exports.
But exports tumbled 4.8% in May from a year earlier, to €88.2 billion, the worst month so far this year. For the first five months of 2013, exports were below the same period last year. Exports to non-euro EU countries, such as the UK, dropped 2.4%. Exports to Eurozone countries – in a magnificent display of the fiasco that the euro has become – plummeted 9.6%.
For the month, the Eurozone bought 36.6% of Germany’s exports and the non-euro area 20.0%. While periphery countries have been struggling for years, with demand collapsing in some, it’s France that Germany is most worried about. It buys about 10% of Germany’s exports, more than any other country, but it’s slithering deeper into a full-blown economic crisis with unemployment at record highs, with the auto industry – a key export sector for Germany – in a death spiral, and with consumer demand flagging. Even exports to the rest of the world skidded 1.6%. It was the worse May decline since 2009.