A reason to be bearish on German stocks
The grand coalition’s spending habits could be poison for long-term development, says Die Welt
The recent performance of Germany’s economy has exceeded all expectations, and is still stronger than economists ten years ago could have ever dreamed.
But, writes German daily Die Welt, this has changed. In recent months, there are warning signs in the still rosy economic forecasts.
From Die Welt on Wednesday:
In a boom phase, when the economy is already growing at over-stretched capacity limits, additional government spending can be a source of poison for the long-term development of the economy…
Long-running economic growth is already putting pressure on many places: companies are no longer able to keep up with production, employees moan over overtime and their managers are no longer able to find any suitable staff. One third of the companies are already working above the limit, recently warned the Institute of the German Economy (IW)…
In fact, the economists predict that such bottlenecks in the coming months will ultimately slow down the economy in this country – not only in construction but also in other areas. “In the forecasting period until 2019, capacity bottlenecks and labor shortages are expected to slow growth more and more,” they write. Before that, the panel had already warned in November.
The potential ill-effects of government spending aren’t the only dark clouds on the horizon for Germany. One gauge of economic sentiment among economists has fallen precipitously on fears that a rising euro and America’s protectionist tilt will weigh on the export dependent nation.