Currency

Germany Needs A Strong Europe

Employees pack goods at a logistics center in Bad Hersfeld, Germany. i i

hide captionEmployees pack goods at a logistics center in Bad Hersfeld, Germany.

UWE ZUCCHI/EPA /Landov
Employees pack goods at a logistics center in Bad Hersfeld, Germany.

Employees pack goods at a logistics center in Bad Hersfeld, Germany.

UWE ZUCCHI/EPA /Landov

Earlier this week, the German Economy Ministry announced the country's industrial production grew by 0.8 percent in October—almost triple economists' predictions. On top of that, factory orders have rebounded 5.2 percent. And, oh yeah, business confidence, consumer spending, and hiring were all up as well.

It was starting to look like Germany might thrive even as its neighbors crumble. But then came this: a 3.6 percent drop in exports in October.

The German economy is largely dependent on exports and its biggest customers are the rest of Europe so this drop is hard to ignore. The Bundesbank has cut its forecast for economic growth next year to 0.6 percent...ouch.

Germany has long been a strong exporter but the creation of the euro was a huge boon for the country.

After joining the eurozone, Italy, Greece, Portugal, and Spain could suddenly tap previously inaccessible credit because, to lenders and investors, these countries seemed like safer bets. And with that money they bought lots of stuff from Germany.

Between 2001 and 2008 Greek imports of goods tripled from $28.2 billion to $89.3 billion. Similar numbers held in Italy, Spain, and Portugal during most of those years.

Over that stretch, German exports of goods increased 2.5 times, and its exports of services almost tripled. That translated into Germany's trade increasing from almost 34 percent of GDP to over 44 percent.

Germany's current strength wasn't simply home-grown. And now that its customers' economies are falling to pieces, Germany is going to feel the pinch.

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