Stop the fixation on China trade. Investors should be watching US exports to Europe
That attitude comes at a time when the German government recently downgraded its own economic growth for this year to 0.5 percent from a 1 percent forecast announced last January.
The Germans argue that’s none of their fault. They say it’s all a matter of Washington’s trade wars and policies undermining world peace and security.
Distracted by China trade, the U.S. economic and political officials had nothing to say to counter that widely shared view during last week’s IMF-World Bank spring session in Washington, D.C.
Germany, as a result, got off scot-free because the prevailing opinion held that Berlin, or anybody else, could not prevent a decline of the world economy while the U.S. continued to undermine the world order resting on a multilateral trading system and a peaceful resolution of global hot spots.
Still, to deflect any further pressures, Germany’s finance minister promised 10 billion euro in annual tax cuts and incentives to boost research and development investments by 1.25 billion euro — a hypothetical total amounting to a derisory 0.3 percent of German GDP supposed to bring the country back to a 1.5 percent growth in 2020.
That’s ridiculous. Washington should talk with the Germans to come up with a credible plan of relaunching the EU economy. Otherwise, Berlin will be under relentless pressure to move during the next G-20 summit — the world’s key economic forum — in Osaka, Japan on June 28 and 29. Berlin’s long-suffering friends like France and Italy should join in, along with the International Monetary Fund and the Organization for the Economic Cooperation and Development.
It would be a great pity if Germany continued to blunder with blatantly bad faith nonsense. Indeed, how could a $3.8 trillion economy, presently sliding into an estimated 0.5 percent growth recession, swiftly recover to a 1.5 percent upturn next year on the strength of a puny 0.3 percent of GDP (hypothetical) fiscal stimulus?
It is clear that Germany counts on its export-led growth, driven by a strong fiscal expansion in France (by far Berlin’s largest European export market of 105.3 billion euro), strong U.S. growth (Germany’s largest 113.3 billion euro export market) and an apparently privileged access to China, where German exports ran at an annual rate of 90 billion euro in the first two months of this year.