analysis
of combined government and private-
sector debt to Gross Domestic Product is
much lower than those of the Anglo-Saxon
economies. Germany remains an economic
powerhouse, generating current account
surpluses larger than China. German and
Dutch companies, in particular, are growing
market share. Compared with other
developed economic regions, Europe is, on
many counts, more competitive.’
And it is not just the‘core’ economies of
northern Europe that have been improving.
‘The transition among periphery economies
has gone remarkably well, thanks to the ECB
acting as an effective backstop,’ says Mitchell.
Ireland’s recovery has been so strong that
it has exited its bailout programme, while
Portugal and even Greece are running
current account surpluses.
‘Spain remains key to this broader
recovery, and we have been impressed by
how its austerity programme has been
managed,’ says Mitchell.‘Competitiveness
has improved, and even the property market
is showing signs of recovery.’
Wolfgang Münchau, director of
Eurointelligence, adds:‘Germany will
continue to outperform the rest of the
eurozone.’ Its success in global markets is
due not only to its engineering prowess, but
because it remains cost-competitive.This is
partly due to German labour costs staying
flat, while output per worker has risen (a
trend shared by the Netherlands and France).
Such is Germany’s advantage in
productivity that even the introduction of
a minimum wage of €8.50 an hour will not
have that much impact on competitiveness,
says Münchau.‘Large companies will rein in
employment, restructure their labour force
and further increase productivity levels,’ he
adds.‘They won’t give up on Germany by
off-shoring production elsewhere, mainly
because the “Made in Germany” tag is
essential to their image in export markets.
So they’ll take the hit on costs.’
European companies have long had to
stay competitive, despite relatively high
wages and energy costs – the latter especially
since the US shale gas‘revolution’. But big
corporates have a track record in levelling
things out – even in capital and energy-
intensive industries such as petrochemicals.
Mitchell points out that companies such as
BASF, the world’s leading chemical company,
have integrated different processes into a
single site‘with a sophistication and skill
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