Germany Economic Recession - Germany and the worsening recession and the huge bank losses

Germany, the first economy in Europe, the accumulated bad news Wednesday that presage a tough 2009: a worsening recession in the fourth quarter of 2008 and a loss of almost 4,000 million euros in the first bank in the country, the Deutsche Bank.

"Germany living its worst economic period in decades. It is a situation where are useless books economy," he admitted on Wednesday the head of the German Government, the conservative Angela Merkel in a speech to the Bundestag, the camera Lower House.

Merkel spoke before the parliament shortly after the Federal Bureau of Statistics (DESTATIS) disseminated an estimate that the Gross Domestic Product (GDP) German lost between 1.5% and 2% in the fourth quarter of 2008 in relation to third .

This figure represents a worsening of the recession in the first European economy technically came last fall, after two consecutive quarters of falling GDP.

Moreover, according to provisional data on DESTATIS, Germany's GDP grew by 1.3% in 2008, clearly slowed from previous years, given that in 2007 grew by 2.5% and 3% in 2006. By 2008, the Government had opted for a growth of 1.7% and 1.4% economists.

A bad macroeconomic news on Wednesday joined the announcement by the country's largest bank, Deutsche Bank, which estimated its net losses in 2008 at 3900 million.

The financial crisis and the weakening of the global environment "and were felt in 2008," said Economy Minister Michael Glos conservative.

Specifically, exports, the engine of German growth, sank, and industrial applications in November, while industrial investment also suffered a serious slowdown.

Consumption stagnated and unemployment reduction failed to offset the rise in prices during the summer due to the sharp rise in oil prices in that period.

"I am confident that the package of economic measures (decided on Monday by the government) will impact significantly on the economy this year," said Glos.

That package, a sum of 50,000 million dollars in two years and regarded as the most important since the Second World War, provides a strong program of investment in infrastructure, as well as reductions in taxes and contributions.

Because of that plan, the German budget deficit to exceed 4% of GDP in 2010, said Finance Minister Peer Steinbrück, in statements to the Financial Times Deutschland.

This forecast assumes the failure of the Stability and Growth Pact of the EU, which sets the ceiling to below 3% of GDP.

In addition, the plan was greeted with reluctance by the employer, considering its entry into force in late July and too weak tax reductions.

These criticisms, however, impideron not recognize the German chancellor to the Bundestag that the adoption of the plan was "the most difficult political decision taken as chancellor."

But given the exceptional dimension of the crisis, "such a response was necessary, because doing nothing would have been worse," admitted.

The announcement of the contraction in GDP in the fourth quarter, moreover, is the last piece of a sad series of economic statistics for Holger Schmieding, chief European economic division of the Bank of America.

In this context, Schmieding felt that the European Central Bank (ECB) has no choice but to cut for the fourth consecutive time guideline rate at its meeting on Thursday, from 2.5% to 2%.

Economic Recession - Definition

Macroeconomics believes that the recession is a period of decline in GDP of an economy. The National Bureau of Economic Research (National Bureau of Economic Research) of the United States considers any recession continued decline in economic activity for two or more consecutive quarters. A continuing situation of recession is known as depression. A short recession is often called economic correction. However, some economists, including John Kenneth Galbraith believe that you can not establish a reasonable difference between these three terms beyond the desire to avoid the panic that seizes the population.

In the nineteenth century developments of the same magnitude were called crisis. In another simple example we could say that the recession is when people stop investing their money to keep their cash in their hands.

Recessions are caused mainly by economic shocks. The greatest depression of the twentieth century was the Great Depression of the 1930s. Other notables include two recessions oil shocks of the'70s.

Economic Recession - Current Scenario

The economic data being recorded in recent weeks indicate increasingly clear that the world economy is on the brink of another economic recession.

The coincidence of this with the attacks in New York takes keen cause confusion and little justification, that the attacks have been the cause of the deteriorating economic scenario and new. This allows, in turn, that economic and military responses that are taking place to safeguard the interests of big industry to be the most technically desirable to improve the economic climate and to combat terrorism.

However, the real causes of change in the economic cycle and others are coming from further away, even though the attacks have contributed to exacerbate its effects.

The expansion over the past decade has seen the U.S. economy, and that has fueled the rest of the economies has been based primarily on an ultra-liberal regulation of labor markets, which has enabled a rapid and continuous adjustment of the workforce to business demands, at the expense of course a great loss of welfare and quality of jobs and on the other hand, inflation expectations with which he wanted to encourage take the call, and now almost forgotten "new economy".

But these two major bases for the expansion was also shut the limitations of this growth model.

Liberal regulation of labor and ensures a quick adjustment to suit the business needs to accelerate the pace of capital accumulation, since it allows companies no longer bear the labor costs almost as an inevitable burden of fixed costs.

But at the same time, the economy as a whole much more dependent on the cycles of demand and, in general, those variables that are supported in confidence or certainty.

Meanwhile, the over-the entire sector of the economy resulted in a real financial flatulence, as it was based on an artificial hypertrophy of the securities business and a massive debt that did not reflect the real potential for expansion the economy as a whole.

What was causing the U.S. economy was in a kind of overheating in the center of it, in the most technologically advanced, but in around them, or what it is like in most of the economic system, could be absorbed the energy that is created.

This is the big problem that the unsustainable economic system of our day: an immense capacity to create value but a real inability to do so effectively because only a very small part of the economy where you can get to the plate is divided.

The change log announcing economic data came in the second quarter warned of the decay of the U.S. economy because of these causes. And if the attacks have been so influential not only for its size, but because they have affected the circumstances that were more directly weakening the economy: the loss of confidence and uncertainty.

The deterioration so immense that they will record the statistics after the attacks can not be explained only by the lonely end of the latter, especially if you consider that going to affect a very wide range of activities and sectors and the U.S. government very active and intervened decisively to cushion the short-term and immediate effects of shock. It is estimated, for example, that the estimated growth rate of international trade will drop five or six percent to two percent in 2002, or that in the coming months Twenty-six million new registered unemployed in the OECD.

It can be said, therefore, that the attacks raised about wind blowing in the direction of the storm that had already begun to rise, reinforcing the trend towards recession brought a growth model inherently unstable and unsustainable.

In fact, the Bush Administration had started to address this drift past months (or even could say that his own election was contested and the first step in that direction) by mobilizing the macroeconomic regulatory system that is more reactionary known, but at the same time, more effective and profitable for the great American industry. Indeed, the declaration of war but did not make the solution to the big capitals had written in the logbook with Bush entered the White House: the use of military spending as a way to regulate the economy in periods of macroeconomic imbalance. Another time, or as always, the reactionary Keynesianism. It is no coincidence that the expansion phase is now closed just started with the Gulf War.

The effects of the economic measures Bush is already starting to hear: grants and contracts to large companies in the military industry and a generous pedrea for all those who financed his election campaign and sensitive tax breaks that primarily affect the levels higher income.

All this, while refusing spending increases that are linked to unemployment and, in general, to other social goals. New York firefighters, before and now proclaimed as heroes detained by police when protesting the reduction of staff, are a really obvious what is really neoliberalism.

It is very possible, in order that this is not just a temporary solution, which the Bush administration has learned the lesson of previous periods and, therefore, is not limited to taking such measures as short-term solution. Rather, it seems that this is a real strategic option to strengthen the military structure as a basis for economic growth more stable and secure than the volatile new economy that is moving only to shock and financialisation coup.

It must finally make a single mention on the international stage. The U.S. strategy will be carried out not only by his demonstrated ability of global leadership, but by the crisis and pathological Japan thanks to a phenomenon that deserves reflection singularizada the unfortunate sclerosis with which the EU is doing With world. Silenced in the political and encorsetada for a stability plan conceived expansionist past but can not simply give the nod to the guidelines imperial encomienda passively while the SINAES zarparzo to avoid that the crisis did not fully take into full changeover, which could become very chaotic.