It was meant to be a fleeting slowdown for Europe's economic powerhouse, fo...
FRANKFURT - It was meant to be a fleeting slowdown for Europe’s economic powerhouse, followed by a rapid rebound.
Compounding the pain, what was thought to be an unfortunate coincidence of one-off factors has turned out to denote deeper structural problems that will keep Germany, and by extension, the 19-member euro zone, weak well into the next decade. Its rapidly aging population helps keep productivity growth weak: because the labor market is shrinking and skilled workers are hard to come by, firms hoard labor even during downturns for fear they will struggle to hire during the rebound.
The government could use those savings to boost spending as it has one of the lowest debt levels in Europe. But in a country obsessed with running a balanced budget, meaningful fiscal stimulus is politically unacceptable. Indeed, when the European Commission slashed its 2020 growth forecasts for Germany earlier this week, it also cut its projections for most EU countries.
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