One of the latest Bundesbank reports signed by the outgoing president, Jens Weidmann, is an explicit admission of weakness: We won’t make it. Yes: in Frankfurt the white flag is waving on the objective of closing the year with a GDP growth of 3.7%. The pandemic queue, chip shortages and supply bottlenecks have turned Germany into an old locomotive trudging uphill. And the forecasts for June aged prematurely, when the momentum of the recovery seemed solid and lasting. The disappearance of the magic moment is underlined by Buba with the reinforcing use of adverbs: In 2021, GDP is likely to grow significantly less than expected. Macroeconomic activity is expected to weaken significantly in the current quarter. The strong momentum in the services sector is likely to decline considerably. Less than expected equates to a 2.7% increase for analysts. More than a stroke of the kidneys, a stroke of the witch.
Not a good viaticum for the social-democratic government in the process of being formed, which perhaps would do better to replace the motto Deutschland über alles with the less bombastic and monastic silence, and pedal. Also because someone still manages to run, like Italy, which should close the year with a rebound of 6%. The result comes after the deadly -8.9% in 2020, against the German contraction of 5%, but overtaking still risks being indigestible in Berlin. And yet, there is just a moment ago: it also happens that virtues turn into weaknesses.
Such a strongly export oriented country pays more than any other for the shortage of semiconductors which has put the automobile sector in crisis above all, from which a large portion of the national wealth derives; a country with a manufacturing connotation pays for the difficulties in getting their hands on ordered goods. Delayed deliveries, sometimes extended beyond the maximum time, then end up overflowing downstream to the retail trade. And that means less full shelves in the lucrative Christmas period, when the available goods could also exhibit price increases that discourage shoppers. Another low blow to GDP.
If consumers suffer from the loss of purchasing power, the mood of businesses tending to leaden is intercepted by the Ifo which speaks of a climate of declining confidence in almost all sectors, with a real collapse in the distribution sector. In short: we grasp the resignation that the real recovery will not arrive before 2022. And we wonder what the first moves of the new executive will be, most likely led by Olaf Scholz’s SPD, in coalition with the Greens and Liberals. The weakness of the recovery should encourage prudence in the tightening of economic policies, as well as avoiding the restoration of a balanced budget and the revival of the EU Stability Pact. Three very delicate points, but cornerstone of the election campaign of the head of the FDP, Christian Lindner.