Signs of sputtering in Germany’s vaunted export and jobs machine shouldn’t come as much of a surprise. Sure, Germany has a far stronger economy than heavily indebted neighbors at the heart of the continental debt crisis. And true, it does do a robust and growing business with Asia.
But you can’t ever fully escape geography. Some 71% of German exports wound up in other European countries in 2011, with just shy of 60% delivered to members of the European Union. The top destination for German exports in 2011? France.
So when Europe’s economy is in shambles, that will show up in the earnings of big Germany companies. To wit, MAN SE, a German truck maker owned by Volkswagen, outlined plans to stop assembly lines at its Munich factory headquarters as well as at a separate plant in the town of Salzgitter as part of a disappointing earnings release on Oct. 30.
The economic bite of such decisions isn’t quite as painful in Germany as in some other nations. That’s partially because of programs such as the “Kurzarbeit,” in which the government pays subsidies to industrial companies to keep employees on when factories are operating at low capacity. (MAN may apply for such subsidies, according to Reuters.)
That’s a sensible policy. But it doesn’t change the fundamental direction of Europe’s economy, which continues to suffer as European policymakers wrangle over the right path forward for the continent. Some of that wrangling might indeed be curtailed if Germany’s economy looks like it is clearly softening in sympathy with its neighbors. If policymakers see that, they themselves might grow a bit more sympathetic to arguments that economic growth, not austerity, should take priority at the moment. And that would be a good thing.