Germany`s Economic Outlook

There was a divergence between economic growth of the core and the peripheral of the euro zone. Germany used to do better, but the latest data suggests a slowdown in German economic growth. It is still positive, but there are two shocks.

There are two main markets for exports, China and Asia, are slowing down. Secondly, the recession of the periphery of the euro zone is taking a toll because after all, most of the exports of Germany go to the rest of the euro zone. There is a significant slowdown of growth, even in Germany. - in Bloomberg

Related: Dax Index, EuroStoxx 50 Index



Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics

Germany has come to understand that the eurozone is as much a political project as an economic one

Several developments helped to restore calm. European Central Bank President Mario Draghi vowed to do “whatever it takes” to save the euro, and quickly institutionalized that pledge by establishing the ECB’s “outright monetary transactions” program to buy distressed eurozone members’ sovereign bonds. The European Stability Mechanism (ESM) was created, with €500 billion at its disposal to rescue eurozone banks and their home governments. Some progress has been made on a European banking union. And Germany has come to understand that the eurozone is as much a political project as an economic one.
 Read more at http://www.project-syndicate.org/commentary/the-eurozone-s-unaddressed-problems-by-nouriel-roubini#SElp5KG16XLL8QAO.99

Roubini : Even Germany is Slowing Down Sharply

Nouriel Roubini : In Germany today for policy meets & a keynote speech. Even Germany is slowing sharply as its 2 key export markets - China & EZ - are weaker- in twitter

Roubini : There is Bailout Fatigue in Germany The core of the Eurozone

ROUBINI: ... I would argue that in Germany in the core of the eurozone, there is also bailout fatigue. They say, for example, the Greeks had a Big Fat Greek Wedding, not for long weekend but for the last 20 years. We give them a first bailout, a second bailout, many Germans want to pull the plug. In China, you have a new government at the end of the year. Either they move away from net exports, from too much savings, from too much capital investments towards more consumption, or otherwise by next year China could have also a hard landing. In the U.S., we have shale gas. I think it has been hyped a bit too much. It's going to help the energy needs of the U.S., but that revolution may take 10 to 20 years. If there is a war in the Middle East next year, the shock to all prices is going to tip the U.S. into a recession because we're not going to be energy independent for at least another decade. - in NPR interview

Nouriel : Germany & the Eurozone core Outsourced Official Financing of the Eurozone

Nouriel :....Thus, Germany and the eurozone core have increasingly outsourced official financing of the eurozone’s distressed members to the ECB. If Italy and Spain are illiquid but solvent, and large-scale financing provides enough time for austerity and economic reforms to restore debt sustainability, competitiveness, and growth, the current strategy will work and the eurozone will survive. In the process, some form of fiscal and banking union may also emerge, together with some progress on political integration. But, however important the fiscal and banking union elements of this process may be, the key is whether large-scale financing and gradual adjustments can restore sustainable growth in time. This will require considerable patience from governments and publics in the core and periphery alike – in the former to maintain large-scale financing, and in the latter to avoid a social and political backlash against years of painful contraction and loss of welfare. - (excerpt from his oped article in the project-syndicate)

The probability that Germany is going to accept aggressive monetary easing, a weaker Euro and a fiscal stimulus is very low

Nouriel Roubini : There have been baby steps taken in the Eurozone. The problem right now in the Eurozone is that there is a double dip recession. Not just in the periphery of the Eurozone, but the latest data from some parts of the core shows that there is a beginning of recession, rise in sovereign spreads in some parts of the core and banking problem even in the core of the Eurozone. Unless you restore economic growth, anything that you do in terms of fiscal austerity and reform is not going to be sufficient. Austerity in the short run makes the recession worse because you are raising tax and cutting government spending. In order to restore growth and, therefore, make the Eurozone viable and sustainable, you need a whole series of different policies. The ECB has to aggressively cut rates, do quantitative easing, credit easing. The ECB has to become a lender of last resort not just for the bank but for the sovereign. The value of the Euro has to fall another 20-30% and if the periphery of the Eurozone is going to engage in recessionary and depressionary fiscal austerity, Germany and core of the Eurozone should postpone their fiscal austerity and should do fiscal stimulus. The probability that Germany is going to accept aggressive monetary easing, a weaker Euro and a fiscal stimulus is very low. Therefore, the recession of the Eurozone is going to get worse and the fiscal and financial problems of the Eurozone are going to get worse rather than getting better.

Roubini predicts an expensive future: for the German Tax Payers

Nouriel Roubini  predicts an expensive future: for the German Tax Payers he speaks out what German taxpayers hardly want to hear: he believes that the Euro area needs substantial amounts of money from Germany. Money which finally has to come from the German taxpayers:
Spiegel: Star-Ökonom sieht Euro-Schicksal in deutscher Hand, Jan. 8, 2011
Er hat die Finanzkrise vorhergesagt, nun prognostiziert Nouriel Roubini den Deutschen eine teure Zukunft: Der Star-Ökonom weist der Bundesrepublik die Rolle des Entscheiders über Leben oder Tod des Euro zu. read more in the Spiegel

Roubini predicts stocks to continue to fall and lose another 20% of their value

Roubini : Investors may only be safe in cash and other safe heaven such as short term government bonds in countries that do not have a serious debt problem like Germany

Nouriel Roubini predicts hit in the stocks and commodities markets , stocks will continue to fall and lose another 20% of their value as the world economy weakens Roubini predicts ....Investors may only be safe in cash and other safe heaven such as short term government bonds in countries that do not have a serious debt problem like Germany