4. Germany - export led

Question 1

Why doesn’t Germany grow economically

Answer 1

Their private consumption is low, people save to much. And Consumption normally is 50-60% of the BNP

Question 2

Why is Germany obsessed with very low levels of debt

Answer 2

Low debt = low interest rate = more capital flow in the nation

Question 3

Strenght and weakness of Germany’s growth model:

Answer 3

Strenghts:
- Strong foreign demand
- Stable currency (the euro)
- Technological advantage (germans are good a producing)

Weakness:
- Rising competition from China
- Their growth depend on foreign demand
- prioritizes exports over domestic investment

Question 4

How can Germans make their economy grow faster, with high savings and low consumption.

Answer 4

• Use negative interrest rate. This means people don’t want to save because it will cost them money.
• Internal devaluation = controlling wages, letting wages follow inflation. meaning Germany can control the price of products keeping them low = more competitive.

Question 5

What are the key features of Germany’s export-led growth model?

Answer 5

The model is based on real undervaluation, where domestic prices grow slower than foreign prices. Exports contribute heavily to GDP growth (75% from 1995–2015) and are highly sensitive to price changes

Question 6

How do fiscal and monetary policies support Germany’s export model?

Answer 6

• Monetary focus on price stability (led by the Bundesbank)
• Fiscal, limiting local governments’ ability to spend and keeping inflation low to support export competitiveness.

Question 7

What is unique about Germany’s sectoral structure?

Answer 7

The manufacturing sector remains strong, contributing 23% to GDP

Question 8

What were the Hartz Reforms in Germany?

Answer 8

(2002–2005) were changes to Germany’s labor market to reduce unemployment. They introduced mini-jobs, job centers, and stricter rules for unemployment benefits. While they helped increase employment, they also created a low-wage sector.