BERLIN: The eurozone’s powerhouse remains Germany, its largest economy, accounting for just under a third of all economic activity. But the IMF is among critics worried about a shortage of investment by the government and the country’s ability to handle its ageing population.
For now the German economy remains in rude health, so much so that the country recorded a much higher-than-expected budget surplus for the first half of this year. Berlin received €18.5bn — or 1.2 per cent of gross domestic product — more than it spent in the first six months.
The scale of the surplus has revived a longstanding debate between the government and economists on whether Germany should spend more. “This is a hugely political issue here in Berlin,” says Marcel Fratzscher, head of the DIW think-tank. There seems little pressure to act in the short term. Germany’s economy is set to grow by 1.7 per cent this year, according to the Bundesbank’s projections — a figure that is slightly more than the eurozone average after years of Germany outperforming other economies in the region.
Labour market reforms, made in the early 2000s, are paying off. Unemployment is at post-reunification lows and labour force participation is impressive. The buoyancy of the labour market is one reason why the tax take that the government received in the first half of the year was so high.
