Quote from clacy:
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A Keynesian Success Story: Germany's New Economic Miracle
from:
http://www.spiegel.de/international...-germany-s-new-economic-miracle-a-707231.html
Germany's New Economic Miracle
During the worst of the global financial meltdown, Berlin pumped tens of billions of euros into the economy and spent hundreds of billions propping up German banks. Now, the country is reaping the benefits as Germany is once again Europe's economic motor. By SPIEGEL Staff
It was just the sort of photo-op German Chancellor Angela Merkel urgently needs. Peter Löscher, the CEO of electronics giant Siemens, was sitting on a throne-like chair in the governor's palace in the central Russian city of Yekaterinburg. Contracts were being handed to him in brown leather folders, and every time Löscher signed one of the documents with his malachite green pen, the chancellor clapped with delight. The procedure took place four times, and by the time the round of contract signing ended, Siemens had secured Russian orders worth about â¬4 billion ($5.2 billion).
The real purpose of Merkel's five-day visit to Russia and China last week was to hold political talks with the two countries' leaders, but the most important message of the trip was meant for the German people. Look, Merkel seemed to indicating to German citizens, German industry is in demand worldwide, even if the government at home is divided and lacking direction.
The German economy has indeed come roaring back to life this summer. Two years after the outbreak of the financial crisis, the auto industry is adding extra shifts once again. The machine building, electronics and chemical industries are all reporting a rapidly growing number of orders. Total unemployment is expected to drop below the 2.8 million mark this fall, the lowest level since 1991.
For the first time in decades, the former "sick man of Europe" is back to being an engine for economic growth. According to an internal government assessment, the country's gross domestic product increased by more than 1.5 percent in the second quarter of this year. In their last prognosis, completed in April, government officials had predicted only 0.9 percent GDP growth. Production in the manufacturing industry increased by 5 percent over the previous quarter. The government assessment also shows that exports grew by more than 9 percent in May.
'Number One in Europe'
If the trend continues, say the experts, the German economy will grow by well over 2 percent this year, or almost twice as much as in most neighboring countries. Economists are already proclaiming a second economic miracle, while a former French foreign minister is complaining that Germany is "number one in Europe" once again.
The unexpected comeback is the result of an unprecedented large-scale economic experiment. After last year's dramatic economic slump, Chancellor Merkel, after some initial hesitation, decided to support a bailout program modeled on the theories of British economist John Maynard Keynes. When the economy is in decline, the professor concluded based on the experiences of the Great Depression, the government must quickly counteract the trend with massive government spending programs.
In keeping with Keynes' theory, the former grand coalition government of the center-right Christian Democrats (CDU) and the center-left Social Democrats (SPD) launched an extensive package of stimulus and bailout measures, which included â¬480 billion for ailing banks, â¬115 billion for financially weakened companies and â¬80 billion for two programs to stimulate the domestic economy. As then-Finance Minister Peer Steinbrück said, the goal was to "fight fire with fire."
It did not proceed entirely without collateral damage. The government kept moribund banks alive and rescued companies that didn't need rescuing. It spent money to allow companies to scale back production and paid consumers premiums to destroy assets with intrinsic value. Streets were repaved only to be torn up again soon afterwards, and schools were renovated and later shut down.
Although a gigantic waste of money was put into motion, it did prove to be extremely beneficial during last year's historic economic slump. Government debt skyrocketed, but in return companies received new orders, consumers had more money to spend and banks, no longer fearing that their borrowers could soon go out of business, started lending again.
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sorry dudes I know it's a lot of effort but you'll have to click on the link to read the full article, that is if you're interested.
