And you thought China was bad.
As Germany pushes for fiscal austerity amongst its eurozone brethren, it’s worth keeping in mind just how conservative die Deutschen themselves have been, in one sense.
To wit, some just-published charts from Goldman Sachs.
The bank is pretty bullish on Germany’s economic prospects, but sees one major area of weakness — the country’s level of consumption, which hasn’t budged for over a decade now:
As the second chart should suggest, that’s not really the ze Germans” fault. According to Goldman, weak consumption is a result of weak real disposable income and higher taxes. Part of that should be reversed in the coming years, since the German government has already moved to cut taxation.
But back to that rebalancing act:
Of course, a successful rebalancing of the Euro-zone economy is in Germany’s own interest. This is the case not least because German households, financial institutions and corporates own a great deal of financial assets from countries in the rest of the Euro-zone.
In other words, while Germany has been conservative consumption-wise, it has’t shied away from investing abroad. We’ve mentioned Germany’s Bank-Asset-Berg plenty of times before — but here’s another variation, courtesy of Goldman. It’s the net foreign asset position of Germany and some of its eurozone comrades:
As Goldman’s Dirk Schumacher puts it:
Germany’s net asset position in 2010Q1 was almost €900bn. A country breakdown for these assets is not available but we can reasonably assume that the counterparts of the positive German net position can mostly be found in the Eurozone’s periphery. The value of these assets also depends on whether these economies can manage the transformation process successfully. Stronger domestic demand in Germany should facilitate this process significantly.
Let’s hope so.
Full note in the Long Room.
Related links:
Rising global imbalances likely to precipitate new crisis – Naked Capitalism
Merkel has joined Thatcher in Europe’s corner shop – FT
Willkommen im Hotel Kalifornia - FT Alphaville
The IMF on Germany’s Bank-Asset-Berg – FT Alphaville