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back to index backEUROtalk September,  2005


Bouncing Back- Two Studies Highlight Germany's Economic Strengths

It's been a painful few years, but a bright economic future is finally dawning in Germany. That's the conclusion of a recent Goldman Sachs report assessing the country's current strengths and weaknesses. Titled Germany Profits from Restructuring” the study finds that the country has largely overcome the obstacles that were acting as a drag on economic growth.

According to Goldman Sachs, the signs of improvement are far-reaching and deep, and they reflect a pattern of change going back several years. The German economy seems better placed, relative to its Euroland partners, than at any time in the past decade,” says the report. More to the point: Germany has regained its competitive position.”

The report's authors say they expect a return to positive investment growth in Germany in 2005 for the first time in five years with a recovery in household income and consumption growth following later this year”. That's an extremely encouraging assessment, from an authoritative source.

So what accounts for these positive developments? The study attributes the nascent recovery to efforts by German firms to improve their return on capital. Faced with higher borrowing costs from German banks, companies reduced capital outlays and started cutting wage costs. These steps weighed on household spending and slowed economic growth. But now that business profitability has improved (and labor reforms have been introduced) a new growth environment is emerging.

Other aspects of Germany's business climate are highlighted in a re-cent study by Ernst & Young. The survey of 672 international companies gives Germany top rankings in Europe in several categories including employee qualifications, transportation infrastructure and telecommunications. The country is also especially prized for its top-notch research and development resources.


Source: Invest in Germany Agency - GAI


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