German business confidence is high. The country that gave us the Wirtschaftswunder, the original post-War “economic miracle”, may be Europe’s best hope for the future.
Perhaps the real miracle is that the Germans are so optimistic, given Germany’s underlying problems. The labour market is still over-regulated and Germany’s welfare state ensures that salaries are a relatively small proportion of the costs of employing people there. Germany is also the cornerstone of the ailing single European currency, and will almost certainly be presented with the bills for bailing out a succession of less disciplined countries in the near future.
Nevertheless, Germany has definitely retaken her traditional position as Europe’s most competitive economy – after losing it, briefly, to the UK in the mid-1990s. Other nations would do well to study the reasons for this...
1 Fiscal Discipline. Two years ago, German politicians from both sides of the political spectrum were united in their contempt for British and American plans to spend their way out of recession. Instead, they followed their own strict austerity programme. The result: Germany was out of recession before the UK and the USA, and is now two years ahead on the road to recovery.
2 Technology. Germany defies the decline of European industrial competitiveness thanks to a national obsession with constant technical innovation and precision. The Germans accept they cannot compete with the developing world on price and instead dedicate their whole economy to competing on quality. In Germany engineers have more status than lawyers – if only America could say the same!
3 Education. German Universities may not be as trendy as the American Ivy League or British Russell Group, but the German secondary education system is one of the best in the world, and their commitment to technical education is, predictably, given the national obsession, unsurpassed. A general population who are literate, numerate, comfortable in foreign languages, and technically skilled provides a better pool of potential entrepreneurs and key workers than a surplus of academic degrees.
4 Reputation. The emphasis on technical quality pays off. The German brand name is as strong as ever. Success builds success.