Germany's Massive Rebound Has Nothing To Do With Exports To Europe

Germany’s exports to the rest of the world, not a dominance in European demand, has been the driving force behind the growth of its economy, according to Deutsche Bank.

While the importance of emerging markets in Germany’s growth is rarely underestimated, the country’s competitiveness in the eurozone markets seems to be somewhat over stated.

Exports to Europe have been in decline, while exports outside Europe have been growing.

Germany Exports Europe

Photo: Deutsche Bank

But this has nothing to do with the United States, and everything to do with emerging Asia.

Germany Exports Asia

Photo: Deutsche Bank

What can be discerned from this is that Germany is out competing the rest of the eurozone in the export market. The reason is partially that Germany’s unit labour costs are by far the lowest in the eurozone.

Germany Unit labour Costs

Photo: Deutsche Bank

There is consensus around either Germany increasing pay, or the rest of the eurozone reducing costs, to balance what is now a difficult situation in the eurozone in regards to wages.

But what might be a bigger problem is the desirability of brand Germany abroad. And that’s not going to help Southern Europe because German companies seem to rely on Central Europe for production, rather than southern.

Germany Poland

Photo: Deutsche Bank

So even if Germany raises its labour costs, the result might be a win for Poland, and not for Europe’s south.

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