Thursday, 10 May 2012

The secret behind Germany´s economic success story

“We do not live on cutting people’s hair or delivering pizza,” Mr. Westerwelle told the gathering of German manufacturing moguls. “We make great products — reliable products that have beautiful designs” and are sought around the world.
Guido WesterwelleForeign Minister of Germany

What is the secret behing Germany´s recent economic success story?
Answer: Demand for German luxury products in authoritarian and undemocratic developing countries, particularly communist China (and also Russia).  
Peter May, a consultant for small German luxury manufacturers, said that expansion into emerging markets is the future for German industries, from the auto giants Mercedes-Benz and Volkswagen to the smallest family-owned firms.
China already has become the biggest market for one luxury automaker — Audi — and its parent company Volkswagen claims the biggest share of the Chinese auto market, which at 16 million vehicle sales a year is now the world’s largest.
Audi’s luxury sedans line the parking lots of Chinese government agencies in Beijing and elsewhere.
“Our products have to be perfect. They have to be masterpieces. That is the criteria” to succeed, he said. While only the wealthiest people in most nations can afford many of these products, as a group they control huge amounts of money and are one of the fastest-growing markets in the world, he said.

German foreign minister Guido Westerwelle confirmed this recently in a speech:
German leaders acknowledge that their success owes in no small part today to the ascendance of China and other emerging countries, where a burgeoning class of newly affluent consumers has developed a strong appetite for German luxury goods.
While other European countries remain the biggest market for German products, Mr. Westerwelle said, Asian countries now account for about one-fifth of German exports, and that is where the growth is fastest.
“We must understand that this is the source of our prosperity,” he said.
So do not except any strong German criticism of Chinese (or Russian) human rights violations any time soon. Neither Westerwelle nor Merkel are prepared to sacrifice their "source of prosperity" by demands for democracy and human rights for the citizens of China, Russia and other undemocratic customer countries. It is so much easier to criticize e.g. the Ukraine or even Hungary for their alleged human rights violations. 

But even abstaining from serious human rights criticism does not necessarily prevent an economic slowdown in Germany: 
Dieter Farwick, retired brigadier general and senior vice president of the World Security Network Foundation, also questioned whether Germany’s rise in influence will be more than transitory.
“Nowadays, the majority of Germans believe that Germany is unsinkable,” he said. “One hundred years ago, the Titanic’s passengers felt the same. … They were wrong, too.”
Mr. Farwick expects that German efforts to hold together the 17-nation eurozone will be defeated eventually by the overwhelming burden of trying to rescue the floundering nations of Southern Europe.
“For the next few decades, rich European countries like Germany and France will have to spend trillions of euros to help put the poor countries back on track,” he said. “There will be no resources left for defense, security and stability” and the “European project” will crumble, he said.
Read the entire article here
There are also questions marks as to how long the Chinese economic boom will last. A serious slowdown in China - which appears more and more likely - will seriously hurt Germany´s newly won "source of prosperity".
The Merkel government´s senseless "Energiewende" (economic transition policy) is also bound to seriously hurt the German economy in the coming years. 
The economic future of the European Union´s economic engine is thus not at all as promising as many observers now seem to believe. 
(image by wikipedia)

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