During her successful re-election campaign, Chancellor Angela Merkel’s message was that Germans were living in a prosperous, recession-proof economy and the eurozone problems were contained. But Germany’s economic power and financial strength is overstated.Germany remains dependent on its neighbours, with 69 per cent of total exports going to European countries, including 57 per cent to the member states of the European Union. In 2012, Germany ran a trade deficit of €27bn with Russia, Libya, and Norway, mainly for energy imports. Germany also had trade deficits with Japan (€4.7bn) and China (€11.7b). In contrast, Germany had a trade surplus with the eurozone (France, Italy, Spain, Greece, Portugal, Cyprus and Ireland) of €54.6bn.....Continued weakness in these troubled countries will affect German economic prospects. High energy prices and increasing stresses in emerging markets will exacerbate its problems.Eurozone members remain committed to avoiding the unknown risks of a default and departure of countries from the euro. Governments in the at-risk economies are unlikely to meet agreed budget deficit or debt level targets. Banks will face rising bad debt losses and require capital infusions. For both weaker sovereigns and banks, access to financial markets will remain restricted. Cost of commercial funding will remain above affordable levels, meaning that assistance will be needed.
Posted on: Mon, 04 Nov 2013 07:53:47 +0000