Debt

Germany: From Hero To (Almost) Zero

The European currency euro logo is shown in front of the  European Central Bank in Frankfurt.
Frank Rumpenhorst/Getty Images

Strong economic growth takes the sting out of debt. When a nation's income increases, tax revenues go up. Existing debts become more manageable.

By the same token, when economic growth stalls, debt problems become tougher to solve.

So this morning's news out of Europe is cause for concern: Overall, the EU economy grew by just 0.2 percent between the first and second quarter of this year, officials reported.

The German economy — the export powerhouse, the core of the core of Europe, the economy on whose future Europe depends — grew by 0.1 percent. The French economy, the continent's second-biggest, didn't grow at all in the second quarter. Growth in other countries was slightly higher, but still weak.

In the coming months, Germany and France are likely to be pulled more deeply into supporting the weaker economies on Europe's periphery. There's been talk recently of issuing eurobonds, which would put Germany and France on the hook for the debts of other EU countries.

Angela Merkel and Nicolas Sarkozy are meeting today to discuss Europe's debt troubles. Officials have said eurobonds aren't on the agenda — not surprising, given significant political opposition in Germany to further bailouts.

But more bailouts will almost certainly be needed. The stalling economy in the core of Europe is likely to make that opposition more intense, and make future bailouts more economically painful.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.