Today in schadenfreude
Since the financial crisis of 2008, the Eurozone has been in a state of what Martin Wolf calls "managed depression," now considerably worse than the Great Depression of the 1930s. This is almost entirely the responsibility of German policymakers, who are the main political force behind the savage austerity regimes inflicted on nations like Spain and Greece, leaving them with unemployment rates over 20 percent.
Germany itself has done fairly well comparatively, keeping its unemployment rate low and managing at least moderate growth. But it too has passed considerable austerity, which is beginning to tell on the German economy. German industrial output crashed by 4.0 percent last quarter, the worst result since the financial crisis, and the Eurozone as a whole is dangerously close to deflation. The place needs more spending and demand, which makes for sadly ironic stories like these:
The Kaiser Wilhelm Canal in Kiel is crumbling. Last year, the authorities had to close the 60-mile shortcut from the Baltic to the North Sea for two weeks, something that had never happened through two world wars. The locks had failed...The canal was shut again last month because sluice gates were not working, damaged by the constant thrust of propeller blades. It has been a running saga of problems, the result of slashing investment to the bone, and cutting maintenance funds in 2012 from €60m (£47m) a year to €11m. [The Telegraph]
That's austerity for you: cut spending and raise taxes for no reason, and then your infrastructure collapses. Indeed, Germany's economy only looks strong compared to the utter catastrophe in southern Europe. Overall growth has been considerably weaker than in the United States (which is not doing that well either). It remains to be seen whether Germany will be able to grasp the nature of their problem, but the solution is obvious: dose the economy with stimulus. A good place to start would be patching up that canal.