The newspaper headline said: “German Economy to Become a Midget.” Sure, and Elvis is alive and well in Berchtesgaden, learning to yodel and secretly preparing an album of Bavarian lullabies.
But the accompanying article in Die Welt was not without substance. It reported on a survey by the Organization for Economic Cooperation and Development which projects German growth falling to an average of 1.1 percent over the period from 2011 to 2060 [pdf]. That’s at the bottom of a sample pile of the world’s critical industrial and emerging economies, about half the rate of the United States’ or Britain’s expansion, behind France, Italy and even Greece, and left in the dust by India, China, Indonesia and Mexico.
Angela Merkel, who faces re-election this fall, could well shrug and say to herself, I’ll be 106 before I’m accountable in the face of that piece of computerized clairvoyance — however estimable the source.
Still, starting now, the O.E.C.D. considers that the German economy will trend downward over a half century at levels increasingly under 1.5 percent growth, which, while not total stagnation, means little more than marking time. That doesn’t work as a credible perspective for a country that wants to call the shots in Europe. If this is where austerity in lifetime-doses leads you, then where’s the justification of the German blueprint for the rest of the European Union?
Germany in 2013 is also a country whose banks are in notoriously risky condition; whose population is expected to lose 17 million inhabitants by 2060; and whose domestic automobile industry is reported to have produced 500,000 fewer cars in 2012 than the previous year.
In the short term, the Bundesbank asserts real G.D.P. growth will top out at 0.7 percent in 2012 and 0.4 percent in 2013. Not good. After a return to levels of around 1.5 percent, the O.E.C.D. said in another assessment that, without significant reform programs, Germany’s rate of expansion would dip under 1 percent from 2020.
Doubting voices are becoming louder. Alain Minc, a former economic adviser to President Nicolas Sarkozy, now describes Deutsche Bank as a “world problem” and said, “I’m convinced Germany will be worse off in five years. Its demography is bad. It has no significant gains in competitiveness. It’s at its apogee and will start to decline.”
Why is this so counterintuitive? Because Germany has been brilliantly sold with the help of Merkel’s placid, elevator-music manner. Der Spiegel has written she dispenses the truth to Germans in “homeopathic doses.” Indeed, those sparing spoonfuls are what the external world has often swallowed. Example: In autumn 2011, talking about the German economy’s world role, she bragged: “We’re the locomotive again.”
A few days later, Wolfgang Franz, chairman of the chancellor’s committee of economic advisers, contradicted her. He said that there were no more economic locomotives in the world, and insisted that there was nothing in the German economy to signal a long sweep of growth since Germany had basically “spent its structural reforms of 2005.”
Who listened to what turned out to be the truth? The fact is, once she took office in 2005, Merkel never felt she had to pay attention to her own campaign rhetoric favoring further labor market streamlining. Her Germany certainly did not listen when the G-20 group of economic powers signaled in 2009 for the country to cut its export surpluses by increasing domestic demand. Following through with real effort would have meant opening new markets to its European neighbors and encouraging German consumer spending.
Now, the O.E.C.D. identifies the decline in Germany’s working population as a central factor in the projection of its economic shrinkage. Sure, the circumstances help provide relatively low unemployment numbers (6.9 percent). Yes, retirement at 67 has been voted into law — but it is only scheduled to come into full effect in 2030, when it might have to be upped again to age 70.
And those German banks, described in 2010 by a German member of the European Commission as “the world’s riskiest”? The O.E.C.D. last year reported the “high vulnerability” of the system and found that “a reform of the sector is still lacking.”
Taken together, since Merkel likes little steps, and not big, legible plans for Europe, her overall vision for its future still represents a very German outline. Under the E.U.’s planned banking supervisory system, Germany’s insistence has resulted in its officials, not European ones, being designated to oversee the country’s rickety public banks.
It’s a consistently stubborn approach. In 2060, according to the O.E.C.D.’s long-range calculations, Germany will still be running a current account surplus — an imbalance hardly marked by selflessness and generosity — while the biggest players like China and India are projected over time to have moved into current account deficit status.
This fall, Merkel’s Social Democratic opponent will be Peer Steinbrück, an abrasive man who served as her finance minister during the 2005-2009 grand coalition, and initially rejected the notion of Europe-wide bailout packages (he couldn’t trust the neighbors).
Whatever the realities of Germany’s diminishing momentum, the poll numbers and the S.P.D.’s similarities to Merkel in defining her country’s self-interest say she will be re-elected.
John Vinocur is senior correspondent at the International Herald Tribune.