What’s in Store for Germany, Just a Short Boom or a Significant Upturn?

BriefLetter - Issue 07/2006

First of all, I would like to say that the economy in Germany is going to create a period of growth which is not only going to last through 2006. This growth is going to bring noticeably dropping unemployment figures, a distinct improvement for the financial state of public authorities and also more consumption.

I do not share the misgiving of the increase in VAT in 2007 possibly destroying the beginnings of improvements. The bulk of goods for daily consumption are exempt from this increase in the first place and when it comes to the fulfilment of wants, Germans are by all means free-spending. For the rest, retail and industry are going to be very anxious to calculate carefully in order to help the consumer save. Not like it had been done with the introduction of the Euro. The fear that the increase in VAT is going to inflate moonlighting is excessive.

When Germany creates economic growth of two percent and a few tenth, a new dynamic is going to arise which is not going to collapse from one quarter to the next. We can feel already today that alone the improvement in the emotional state of Germans in general is giving a boost to the country.

However, I would also like to point out that consumption is going to change radically. Quantitative consumption is going to decrease, while qualitative consumption is going to rise. The hope that the battered, hardly existing center of the sales markets is going to recover or even going to take on an important role again, is not going to come true, because the consumer does not know what to do with the undistinguished offering in the center of the market. As market observation has taught us, the consumer is going to continue to be very frugal, when it comes to fulfilment of needs. When it comes to the fulfilment of wants, the consumer is going to lean towards immaterial values.

Qualitative consumption generates quality of life and vice versa. Quality of life we will only find where qualitative consumption is at home. This type of ‘better living’ automatically nurtures willingness and performance ability of people. This is what strengthens the upswing and adds stability. It has always been the people who make up a thriving country. For us, who are shaping markets this means: We have to take chances, we have to be a bit more daring, we have to rein in notorious sceptics and tackle the tasks ahead of us, laced with a tad bit healthy optimism.

Of course, we should not overlook that the government is going to be a bit less able to do good for its citizens and that government benefits are paid for dearly.

Both means expenditures people didn’t have to deal with in the past. Anything the government pays for its citizens had to be paid for by the citizens first. At the end of the day, this means that ‘less government’ means more freedom for the citizens to shape their own life. Social responsibility towards poor citizens and the solidarity with them does not have to be left behind.

Surely, no country lives in a vacuum. Positive global economic development, the absence of war, affordable energy costs, the control of cash flow and a successful offset between rich and poor have to be added on to the personal contribution of Germans, so that things can look up continuously. Without being euphoric one can say that there are still a lot of problems to be solved. However, there have been much gloomier times. And because everyone loves to mob politicians and to accuse them of incompetence, we should point out that politicians have taken a lot of positive measures lately.

I am very convinced, that Germany and Germans are facing an economic boom, in other words ‘a long-lasting period of fine weather’. And now it is time to make way for a new quality of strategic planning.

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