End of the Wirtschaftswunder? Germany's sudden slowdown

Fri Aug 15, 2014 6:26am EDT
 
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By Noah Barkin

BERLIN (Reuters) - The German soccer team's romp to victory in last month's World Cup was hailed at home as a symbol of the country's emergence as a confident global economic power.

But in an ironic twist, the feel-good triumph in Brazil may have come at a time when Germany's new "Wirtschaftswunder", or economic miracle, is coming to an end.

In recent weeks, the economy that proud German politicians have taken to describing as a "growth locomotive" and "stability anchor" for Europe, has been hit by a barrage of bad news that has surprised even the most ardent Germany skeptics.

The big shocker came on Thursday, when the Federal Statistics Office revealed that gross domestic product (GDP) had contracted by 0.2 percent in the second quarter.

"The euphoria that we've seen, the perception that the German economy is booming is simply misplaced," said Marcel Fratzscher, director of the DIW economic institute in Berlin.

So why is Germany suddenly ailing?

The standoff with Russia over Ukraine has received its fair share of blame in the German media. But that conflict may not hit the economy with full force until the third quarter. It was only last month that Europe stung Moscow with economic sanctions, prompting a tit-for-tat response from Russian President Vladimir Putin.

In reality, economists and some government officials acknowledge, there are deeper reasons for the recent downturn. And they have little to do with the spike in geopolitical tensions in eastern Europe or the Middle East.   Continued...

 
The coking plant and blast furnace of ThyssenKrupp Steel Europe AG are seen in Duisburg in this January 14, 2014 file picture.s.   REUTERS/Ina Fassbender/Files