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Economic Study 7/2/2020 1

10 questions on Germany

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Bruno Cavalier
Chief Economist at ODDO BHF

Germany today took over the six-month presidency of the Council of the EU with ambitions that would not have been thought possible even a short while ago. End-2019, it recorded the weakest growth rate in the EU, apart from Italy. It was suffering from trade frictions and the slump in the automotive sector. Deficits were banned, the ECB was held responsible for expropriating savers, European integration was not being widely lauded. Angela Merkel was criticised within her own party. Six months later, the situation has completely changed. The economy is devastated, but less so than elsewhere, and the Chancellor is once again the central figure in domestic and European affairs.

Germany takes the helm of the EU

The EU has a half-yearly rotating presidency in order to involve each member state, be they large or small, in the organisation of its affairs, but let’s be honest and concede that people are rarely interested in the name of the country hosting the presidency. As a coincidence of the calendar, Germany, the biggest EU country, will occupy this position in exceptional circumstances. First, the EU has just experienced the greatest shock in its history. Second, with the UK’s exit, the EU is losing one of its biggest member states and future relations between the two entities will have to be clarified between now and the end of the year. In the present note, we examine Germany’s own situation and its relations with other EU member-states. For the sake of clarity, we have divided our presentation into ten questions.

  1. What is the (provisional) assessment of the pandemic?

At the time of writing, the pandemic has been clearly receding in all EU countries in recent weeks. This is a general relief, but the human toll varies from country to country. According to the excess mortality, Germany looks like one of the countries that has "managed" the epidemic most effectively1. A broad-based testing campaign was implemented as of March, which helped to rapidly circumscribe the main centres of the outbreak of the virus. This policy has been made possible in part through private sector initiative, often in a decentralised manner. At the same time, in France, the government was clumsily trying to justify its lack of preparation (shortage of masks). Germany adopted lockdown measures, but these were less severe than in other countries and were therefore able to be lifted more rapidly (chart lhs). A few more or fewer days of lockdown are important for the measurement of growth in Q2, and thus for 2020.

 

1 According to analysis by the FT (https://www.ft.com/coronavirusfree), the excess mortality rate during the coronavirus crisis was 6% in Germany, vs 24% in France, 25% in the US, 26% in Sweden, 43% in Italy, 49% in the UK and 56% in Spain.

 

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