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Germany recovered rapidly from the 2008-09 recession, with GDP topping pre-crisis rates during 2011 and unemployment falling significantly. Public finances are sound, but further reforms are needed to transform its growth model to thrive as a knowledge-based economy.
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Overview - Germany Survery 2012
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Potential growth in Germany is low and is set to fall further due to ageing. Policy should focus on raising labour input and productivity growth through structural reforms. Implementing cost-effective climate change mitigation policies and fostering eco innovation would also contribute to growth.
Using empirical evidence from panel analysis of current account dynamics and of bilateral trade balances, the paper argues that the large German current account surplus during the 2000s can be explained by an increasing gap between productivity growth in manufacturing vis-à-vis services.
The German banking system came under pressure during the financial crisis, not least due to its significant exposure to toxic assets which originated in the US. In the short run, the stability of the system has been achieved, as discussed in this working paper.
The potential growth rate of the economy has been low for a long time and the crisis has had a further adverse impact, as discussed in this working paper.
Speaking at a conference in Berlin, Angel Gurría says that a new architecture of financial reform together with sustainable fiscal consolidation strategies, structural reforms and efforts to explore new sources of growth will be essential to build a stronger, cleaner and fairer world economy.
Further fiscal easing in late 2008 and early 2009 contributed to a markedly widening fiscal deficit in 2010. A newly enacted fiscal rule will help bring public finances back to a sustainable path, as discussed in this working paper.
Faced with unprecedented levels of unemployment, unsustainable fiscal deficits and public debt and weak economic growth, governments need to focus on innovation and pro-green policies as potential new sources of growth, says OECD Secretary-General Angel Gurría.
Past consolidation has allowed the automatic stabilisers operate fully during the crisis. Further fiscal easing in late 2008 and early 2009 contributed to a markedly widening fiscal deficit in 2010.