Economic Growth to Slow in Germany

The German economy grew by 3% in 2011, the best growth in the entire Eurozone. In October, the government predicted the economy would grow by 1% in 2011, a disappointing number, but reflective of the debt crisis hitting the continent. Now, Germany has cut its 2012 growth estimate again, to 0.7% to reflect how poorly the country views the European economy.

Germany’s growth in the past few years has come from exports, mainly to other European nations. With the contraction of that export market, Germany will need to look for domestic growth, and the lack of buyers for the country’s exports means that Germany industry will need to cut expenses. That could mean job cuts, which will put fewer euros in German pockets.

Interestingly, the country expects the unemployment rate to fall from 7.1% to 6.8% in 2012, which would translate into a domestic spending rise of about 1.2%. Somehow, that sounds like wishful thinking.