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Germany

Is Europe's Strongest Economy Actually The Cause Of The Crisis?

Germany is Europe's only country that has roared back to pre-crisis employment numbers. Still, the International Labor Organization accuses German exporters of being no less than the structural cause of the current euro zone problems.

Germany is the Big Man of Europe, for better or worse (hpeguk)
Germany is the Big Man of Europe, for better or worse (hpeguk)
Catherine Chatignoux

PARIS - Germany's relatively low unemployment rate didn't stop the International Labor Organization (ILO) this week from delivering a brutal assessment of the European powerhouse.

Yes, the ILO 2012 report on global employment trends cites Germany as both the most powerful country in Europe and, along with Australia, the only developed country that has managed to boost its unemployment rate to below pre-crisis levels. But the authors of the report, presented on Tuesday, also accuse Germany of being no less than the cause of the current euro zone problems.

"Rising competitiveness of German exporters has increasingly been identified as the structural cause underlying the recent difficulties in the euro area," they denounced in an accompanying article inside the report.

The ILO targeted the "deflationary" wage policy implemented in Germany after reunification: "As German unit labor costs were falling relative to those of competitors over the past decade, growth came under pressure in these economies, with adverse consequences for the sustainability of public finances." "More importantly," adds the ILO, "crisis countries were barred from using the export route to make up for the shortfall in domestic demand as their manufacturing sector could not benefit from stronger aggregate demand in Germany."

In Germany, the increase in private consumption was more than 1% lower than other euro zone countries between 1995 and 2001. The strategy which aimed to return the country to productivity "created conditions for a prolonged economic slump as other member countries increasingly see only even harsher wage deflation policies as a solution to their lack of competitiveness." This was the last straw, according to the ILO's report, as the "internal devaluation" overly affected employees in the service sector, leaving manufacturing costs high.

Little has been done, on the other hand, to improve productivity itself.

Read the original article in French

Photo - hpeguk

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Economy

Europe's Winter Energy Crisis Has Already Begun

in the face of Russia's stranglehold over supplies, the European Commission has proposed support packages and price caps. But across Europe, fears about the cost of living are spreading – and with it, doubts about support for Ukraine.

Protesters on Thursday in the German state of Thuringia carried Russian flags and signs: 'First our country! Life must be affordable.'

Martin Schutt/dpa via ZUMA
Stefanie Bolzen, Philipp Fritz, Virginia Kirst, Martina Meister, Mandoline Rutkowski, Stefan Schocher, Claus, Christian Malzahn and Nikolaus Doll

-Analysis-

In her State of the Union address on September 14, European Commission chief Ursula von der Leyen, issued an urgent appeal for solidarity between EU member states in tackling the energy crisis, and towards Ukraine. Von der Leyen need only look out her window to see that tensions are growing in capital cities across Europe due to the sharp rise in energy prices.

Stay up-to-date with the latest on the Russia-Ukraine war, with our exclusive international coverage.

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In the Czech Republic, people are already taking to the streets, while opposition politicians elsewhere are looking to score points — and some countries' support for Ukraine may start to buckle.

With winter approaching, Europe is facing a true test of both its mettle, and imagination.

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