Good news: Crisis fails to dent German optimism

Germany is providing Christmas tinsel for the struggling eurozone economy. Never mind the region's escalating debt crisis and global fears about the stability of Europe's monetary union. German business confidence has improved for a second consecutive month – and consumers remain surprisingly cheery.An unexpected rise in the Munich-based Ifo institute's business climate index for December indicated the eurozone crisis was leaving Europe's largest economy relatively unscathed.

 Sharp rises in optimism in retailing and construction reflect falls in German unemployment to lows not seen for 20 years, encouraging hopes that the downturn will be shortlived. Separately, the Nuremberg-based GfK research group reported that German consumers' economic expectations also brightened this month.

The latest Ifo rise was "like a winter fairy tale", said Andreas Scheuerle, economist at Deka bank. "It's the story of a large economy at the heart of Europe that keeps getting better, unaffected by the debt crisis and its neighbours' problems.

Earlier this week the Bundesbank predicted a return to solid growth "in the course of next year", supported by the ECB's expansionary monetary policy and stronger world growth. It expects the economy to expand by 1.8 per cent in 2013, after 0.6 per cent next year and 3 per cent this year.

The Ifo business climate index rose from 106.6 in November to 107.2 in December – the highest since September – as companies revised upwards their expectations for the next six months. "The German economy seems to be successfully countering the downturn in western Europe. This bodes well for Christmas," said Hans-Werner Sinn, Ifo president.

"For 2012, we're optimistic," said Stefan Klebert, chief executive of Schuler, a German company making metal-forming machines for the auto industry which earlier this month received a treble-digit million euro order from BMW, the largest in its more than 170-year history. "The situation in the real economy remains good but of course we are carefully watching current forecasts and early economic indicators," he said. "New orders are brisk and the record order backlog from our 2010-11 business year provides an additional solid cushion".

Hansgrohe, the bathroom equipment maker based in Schiltach in the Black Forest, said sales growth had cooled slightly over the summer – but then picked up again in the last two months. "Bathroom fittings are essentially investment goods – many consumers prefer to put their money into bricks and mortar at the moment and we're profiting from that," said Mr Grohe.

The sanguine mood among business leaders is affecting German consumers. The HDE retailers' association expects a last minute surge in business before Christmas, and has "high expectations" about business in the days between Christmas and New Year. Online Christmas sales were expected to grow particularly fast – the HDE forecast a 10 per cent increase compared with 2010.

German consumers were "defying the rising fears of recession and the most recent escalation of the debt crisis" to focus on the "still extremely favourable" conditions in Germany, GfK said. "With most German companies operating at above-average capacity, the labour market is very robust," it noted. Its overall "consumer climate" index was expected to remain steady in January. Consumers may thus play "the vital role of ensuring that Germany avoids going into recession".

"This is good news for Malta. Germany is very important for us and this is the direction we need to follow. A country that manages well its internal balances and avoids deficits at all costs, invests regularly and substantially in capital infrastructural projects and in support of innovation and restructuring of SMEs through the provision of regular and well funded financial assistance in the form of development guaranteed loans and easy access to finance for innovation, restructuring and research and development, and a country that regularly drives for surpluses on its international balances.

Malta has a good story to tell. I find myself comfortable in Brussels and in other European capitals where I am invited to speak as Maltese employers' representative and as an economist on what we, a small EU Member with very limited resources, are doing to survive and continue to expand and grow and create jobs in highly difficult times and surrounded by other southern European countries all in difficulties. I believe we should continue to remain positive and optimistic. The worst thing our entrepreneurs  can do in 2012 is to lose faith and fall for the cheap talk of many in our media who seem to take fun in denigrating the great efforts of all of us in enterprise to keep our beloved small country moving forward in spite of all the odds.

Our size helps us to cleverly find the market niches whether in finance, in transhipment, in business support services, in exports or in tourism that should keep us going. That is why all GRTU's initiatives, and when on platforms with Government authorities, are specifically geared for special support on access to finance and specific external market support and support for restructuring and innovation. The economic prospects for a number of countries around us may be bad but this should not keep us from looking at the trends in the most successful countries and to venture out and seek our opportunities. And the opportunities are there. Provided our frame of mind and institutional and financial back-up is right." Commented Vince Farrugia GRTU Director General and Member of the Employers Bureau at EESC.