Germany Facing Recession

Fears Mount That Germany Faces Recession says the Times:

After four years of lackluster growth, the downward revision - to 0.7 percent from 1.5 percent - illustrates that economic forecasting in Germany has become mostly an exercise in finding ever-more-precise ways to measure stagnation, economists say.

With GDP growth at 0.7 percent, and (we assume), productivity growth higher than that, Germany should be within sight of a DeLong recession of higher output but falling employment.  And yes, since Germany has had several years of lackluster growth, it has been da long DeLong recession.  Which is probably good for Da Bears.  Stopping now.

Labor market inflexibility is cited as a major problem; could it be that journalists and economists are competing for a secret prize in which the ten millionth commentator to note structural problems with the German labor market wins a prize?  Let's review this entry:

...The German government, meanwhile, seems at a loss for a quick fix. It has begun to overhaul the labor market, through a package of measures known as the Hartz reforms.

Mr. Rürup said that if Germany had a more flexible labor market, it could create jobs with a lower growth rate.

Critics say these measures, while helpful, are only a half step. They make it easier for employers to hire temporary workers and create entry-level jobs for people who have been out of work. But they do not attack the job-protection rules that make it hard to lay off workers.

"They need to face down the unions," Mr. Mayer at Deutsche Bank said. "But they won't - neither the government nor the opposition."

 

Perhaps they need a clever slogan to get people excited about these reforms - I wonder if "Hartz 'til it hurts" would translate well.

Stopping again.

Comments

[Forbes]

Perhaps in Krugman's op-ed regarding stagflation, he just confused the countries and named the wrong one?

[Creech]

Is it Wriston's law that says 'Capital flows to where
it is needed, and stays where it is welcome.?" Capital is increasingly unwelcome in Germany (and France) but, hey, it is the sweaty laborer that creates jobs and value, not the capitalist pigs, right?

[Jimminy]

If economic revival Plan A and Plan B fail there is always Plan E - emigration. There are a few other economies arround the world that are growing and are immigrant-friendly ... it's worked for them several times before ...

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