We hear all the time how Germany is the model economy .
They run a massive (illegal under EU rules) trade surplus, they have relatively low headline unemployment and the government 'balances' its fiscal position usually. That 'balance' is really a mirage though as the German Federal govt. uses state bank credit creation to hide what would normally be considered state investment spending if it were in the 'budget' statements.
But under the surface what is the real state of the German economy?
The Hartz reforms, largely credited with creating the German 'miracle' have seen an explosion in 'mini-jobs' that pay very low part time wages with little to no extra benefits, poverty has increased markedly, states and local authorities are struggling and social cohesion is under strain again.
Significant numbers of financially destitute people are now resorting to collecting discarded glass and plastic bottles … But whereas the majority of those collecting used to be the homeless, alcoholics and drug addicts, more recently it is Berlin’s pensioners and long-term unemployed who are increasingly turning to the practice in order to make ends meet.
Go further and we find that state investment has been low for over a decade as pressures to balance the budget have manifested themselves in cuts to infrastructure when social programmes were politically difficult.
So what has this focus on balancing the budget rather than investment brought?
A CNBC report said that:
Crumbling bridges and traffic jams are staining Germany’s global reputation for efficiency. The infrastructure in Europe’s largest economy — as in the United States — has been slowly deteriorating from a lack of investment over the past few decades …
In 2006, Germany ranked third in the World Economic Forum’s Global Competitiveness Report for the overall quality of its transport infrastructure. This year, it has slipped to 11th place, while the United States ranked 13th.
The German Institute of Urban Affairs estimated that 15 percent of Germany’s municipal road bridges need to be completely rebuilt. German railway company Deutsche Bahn said new measures to increase train punctuality will take several years. Last year, 1 in 4 long-distance trains on the network did not run on time, in part because of construction efforts.
A recent report in the Handelsbltatt Global (May 25, 2017) – A Rusty Bridge Too Far – reported that:
Leverkusen Bridge in Cologne, for example, is host to an almost perpetual traffic jam, its steel so rusty that trucks are no longer allowed to use it. The chaos on this bridge across the River Rhine is so bad that it was a factor in the defeat of the North Rhine-Westphalia government of Social Democrats and Greens in recent state elections …
Leverkusen Bridge is beyond repair and experts refuse to predict how long before it collapses. The cost of replacing it is pegged at around €600 million – only a fraction of the tens of billions needed across the country.
Still think austerity is good policy and the Germans practice sensible economics? Fiscal conservatism is a recession cult.