12 Germany (Feb 11)

12 Germany (Feb 11) - Economics focus Vorsprung durch...

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THE euro zone may be limping, but its largest member is sprinting. Germany grew at its fastest pace for two decades in 2010. An expansion rate of 3.6% put it ahead of most other rich economies, including America, whose GDP grew by 2.9% last year. Sceptics argue that Germany’s strong rebound merely follows a deeper drop in output during the recession than in most other economies. For a proper assessment of countries’ relative performance, you need to take a longer period, such as a decade. Feb 3rd 2011 | from PRINT EDITION conomics focus: Vorsprung durch exports | The Economist http://www.economist.com/node/18061550/print of 4 2/7/2011 4:20 PM
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At first glance, the popular perception of Germany as a laggard seems borne out by the numbers. Germany’s GDP has expanded by an annual average of only 0.9% over the past ten years, just half the pace in America. (For countries which have not yet published their full-year figures, we have used 2010 estimates from The Economist ’s poll of forecasters.) But that is misleading. America’s economy grew more quickly partly because its population rose by almost 1% a year, thanks to immigration and a higher birth rate. In contrast, the number of German citizens is shrinking. That matters because a better gauge of prosperity is not growth in GDP, but growth in GDP per person or average income. This measure produces a very different ranking. Over the past decade Germany had the fastest growth in GDP per person among the G7 club of rich economies; America was in only fifth place (see chart). Using GDP per head also casts new light on the recent recession. Measured by the fal in output per head from the fourth quarter of 2007, Germany’s recession was no deeper than America’s. Germany is also the only G7 country where GDP per head last year was back above its 2007 level. Berlin beats Bay Area Germany scores highly on several other economic gauges, too. It is one of only two countries in the G7 where the unemployment rate ended the decade lower than it began. Its current rate of 6.6% (using the standardised international definition) is the second-lowest, well below America’s 9.4%. For the first time eastern Germany now has a lower jobless rate than California. Germany’s public- and private-sector finances are also in much healthier shape, mainly because a conservative mortgage system helped it avoid a housing and credit bubble. Household debt has fallen over the past decade from 115% of their disposable income to 99%. Over the same period, Britain’s soared from 117% to 170%, America’s from 100% to 128%. Germany also has the conomics focus: Vorsprung durch exports | The Economist http://www.economist.com/node/18061550/print of 4 2/7/2011 4:20 PM
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smallest budget deficit and least government debt relative to GDP. Based on the measures in the chart—growth in GDP per head, unemployment, budget deficits and household debt—Germany ha been the G7’s best performer over the past decade. The IMF forecasts that Germany will also have
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12 Germany (Feb 11) - Economics focus Vorsprung durch...

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