Gott sei Dank! The Germany economy will return to growth

The country's central bank says that the Germany economy will avoid recession by returning to growth in the first quarter of 2013.

by Michael Northcott
Last Updated: 19 Aug 2013

If anyone was a little panicked by the prospect of the eurozone’s most powerful engine going into recession, they can breathe a sigh of relief. Germany’s economy will be back in growth mode when the results for Q1 2013 come out, according to the Bundesbank’s monthly report.

The report forecast that the rest of 2013 will see a gradual increase in activity in Germany. It said: ‘As it currently looks, a plus in economic output [cue jargon-buster: this means ‘growth’] can be expected in the first quarter of this year. For the rest of this year, the economy is expected to pick up gradually, even if the external economic environment will provide no trigger for a sharp surge in demand.’

Of course, Germany’s economy shrank by 0.6% in the final three months of 2012, prompting fear that even that Teutonic hub of European manufacturing is not impervious to the financial woes of the continent. Let’s hope those statisticians are right…

Meanwhile, closer to home, the pound Sterling has carried on its freefall in value against the dollar and the euro, as lenders and investors remain jittery about the long-term health of the UK economy.

Against the dollar, the pound is now at a seven-month low, having fallen 0.5% to $1.54. The euro has risen a worrying 0.3% to 86.3p (a 15-month low) against the pound. Given how badly the eurozone economy is doing at the moment, this is a pretty poor reflection on the UK currency.

The continuing drops in the value of UK currency come after the Bank of England policymaker Martin Weale said that Sterling may have to fall lower as a way of bolstering the UK economy. 

Of course, if our currency is devalued, so is the value of the national debt. But inflating your way out of debt can be an extremely dangerous move: two examples of it are Weimar Germany and modern Zimbabwe, both of which suffered inflation rising so fast the money was almost worthless as soon as it was printed. (Click here for MT’s coverage of how Zim has just $217 left in the government coffers.)

Still, governor of the BoE Mervyn King said that the bank was considering tolerating higher inflation to allow the economy some breathing space. MT reckons the public would gladly given anything a go if it means the economy finally grinds into life…

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