An Economic Energy Gap for the Strong Man of Europe?

Flying into a quiet Berlin’s Tegel Airport less than a week after Germany shocked itself and the world by announcing a shuddering halt to its previous strong climb out of recession was a first step into a world of strange uncertainty.

Munich just a month earlier had been utterly different, conversations with leading professionals and cab drivers alike full of belligerent outrage at seeing Germany’s good financial housekeeping squandered on bailing out the feckless economies of Southern Europe. Now the question being asked is not whether should Germany help, but can it really afford to?

In the intervening period much has changed. Not only has the ineffective squabbling of Europe’s political leaders undermined confidence in a solution to the Eurozone crisis, but Germany has seen its Gallic companion pillar of strength appear to stumble as the speculators took aim at France, encouraged by apparently unjustified rumours of significant problems at a major French bank.

The announcement of growth in Q2 2011 of just 0.1% was well below even the most cautious forecasts. This limp outcome was the worst since the first quarter of 2009 back at the height of the post-Lehman global crisis. Imports rose faster than exports, suggesting that Germany’s manufacturing powerhouse is catching a cold from the downturn in the US and from a pause in the headlong growth of China, as well as feeling the commercial aftermath of the Japanese earthquake and tsunami. Reductions in private consumer spending and construction investment are the other principal worries.

Within days of arriving in Berlin, the mood darkened still further as a survey of 7,000 German businesses revealed the sharpest drop in confidence since November 2008. It seems that there is a general feeling of shock in the business community at how fast the German and the wider European pictures are deteriorating. The potentially bad news is this is already generating a change in the political mood even in Chancellor Merkle’s own party, and one so strong it is apparent even to visitors. With regional elections next month and general elections due in 2013, this is a recipe for caution at a time when firm decision making is essential.

Other signs both of Germany’s problems and its faltering confidence were obvious moving around the capital. Museums and art galleries were unseasonably quiet, to the point that it was even possible to move about freely in the chaotic Check Point Charlie Mauermuseum on Friederichstrasse, which must be some of record. The newly-opened and excellent Pestana Tiergarten hotel was reasonably busy, but surely not as much as the enticing room rate of €62 per night including breakfast should have dictated. One inveterate London diner commented on how empty even traditionally popular Berlin eateries were, though the unexpected plague of mosquitos seemed to find sufficient human flesh to gorge on.

So whither the German economy and what might these issues mean for Europe’s future economic stability and eventual recovery, or indeed the survival of the Euro project? The best hope is that the sudden slowing in growth will act as a wake-up call to policy makers and politicians, warning them that even Germany cannot expect to be immune from the global financial instability.

If they can take the pragmatic and the sensible decisions needed, then maybe Berlin’s world famous Zoo will see its domestic and international visitor numbers grow to outnumber the animal population once more. And maybe Europeans will stop drawing parallels between their leaders and the monkeys on display there.