Month: March 2004

The Economist had some interesting stories last week – among them a very interesting one on Germany’s economy, and another on the EU’s relationship with Russia. The one on Russia is available free here.

As for Germany the Economist estimates some interesting figures.

Germany used to be one of Europe’s richest nations. In the late 1980s its GDP per head was 20% higher than the average of the European Union. But estimates by the Economist suggest that Germany’s GDP per head fell 1%below the EU average last year (measured at purchasing-power parity, to take account of differences in prices). Only four of the EU’s 15 members now have a lower income per head.

Amazing stuff. The model of the Germany economy can no longer be sustained given its ageing population and its somewhat outdated welfare system. But is the same true for the rest of Europe? We always hear about how the US economy is always outperforming Europe – but no, read this:

Yet in many ways Europe excluding Germany looks a bit like America. For example, over the past decade GDP per head in the rest of the EU grew by an average of 2.3% – even faster than America’s 2.1% average growth. European business are often accused if being inefficient and unprofitable, hobbled by high wage costs and red tape. Yet a new study by Goldman Sachs finds that, while corporate America’s rate of return on capital is twice that in Germany, the rate of return in the rest of the EU is even higher. And though it is true that European labour markets are in general less flexible than America’s, Europe outside of Germany has been creating just as many jobs as America. Over the past decade, employment has risen by an average of only 0.2% a year in Germany, against a rate of 1.3% a year in the rest of the EU, exactly the same pace of increase as in America.

What? The Economist praising the rest of Europe? Fascinating figures though. C’mon Germany, get your ass in gear!