Date :Wednesday, October 1st, 2014 | Time : 16:40 |ID: 17810 | Print Germany will soon be ‘sick man of Europe’

SHAFAQNA –  With its low unemployment, record exports and popular leadership, everything seems to be going so well for Germany. Yet disaster lurks just around the corner, according to two heavyweight books that have sent a chill through Angela Merkel’s government. In The Germany Illusion, the economics wunderkind Marcel Fratzscher warns that complacency is leading to stagnation and will make Germany the “sick man of Europe” within a generation. He argues that the two great traits of discipline and thrift will be its downfall because they have prevented investment in a future that looks bleak for the ageing population.

Mr Fratzscher’s 277-page warning could perhaps be ignored were it not the second book in a month to sound the alarm. Olaf Gersemann, the business editor of Die Welt, wrote of the “swansong of a great economic nation” in The Germany Bubble.

Both works raise the spectre of German decline in part fuelled by the employment reforms of Gerhard Schröder, which were credited with having roused the country from its malaise of the 1990s.

“The economy of this country is stumbling,” wrote Mr Fratzscher, 43, the head of the German Institute for Economic Research. “Its growth since 2000 is weaker than the European average. Salaries have risen more slowly and poverty is on the rise, affecting one child in five.” Germany is “resting on its laurels” while the average household income has dropped by 3 per cent since the turn of the millennium, and by 5 per cent for the poorest.

Mr Fratzscher largely blames a lack of investment for the troubles. Investment stood at 23 per cent of GDP in the early 1990s but has fallen to 17 per cent, below the 20 per cent average for industrialised countries. “The downfall of the German economy will accelerate if we do not fundamentally change the current policies,” he said.

Mr Gersemann pointed out that Germany lay 156th in an international ranking of economic growth over the past two decades, behind Tonga, and level with Italy and Portugal. “Germany is hailed as the model for the world . . . but pride comes before a fall,” he wrote.

He also questioned whether the Schröder reforms had revived Germany, arguing instead that they had plunged more people into insecurity.

Both authors warn about the falling birthrate that is on course to take Germany from the most populous country in western Europe, to third, after Britain and France, by 2050.

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