Chermany

Bloomberg has a couple of excellent pieces out this week on what’s going on with the French and German economies. The story of how Germany lately managed to rally its growth and drive down its unemployment rate is of particular interest to the Italian observer, in that a lot of the success seems to have to do with Germany’s Mittelstand — small- and medium-size businesses similar to Italy’s — and the long-term financing that underwrites their successes. (Check out Konrad Adenauer’s grandson taking a nice swipe at those profligate Anglo-Saxons.)

Want to borrow some money?

Germany’s response to unemployment — to have workers work less hours with no reduction in pay — is redolent of how Italian managers of SMEs deal with their problems as well, but obviously more to the story than that, since Italian unemployment keeps climbing and is now nationally at 8.5%, compared to Germany’s 7%. Of course Italy has undertaken labor reform — most famously the Marco Biagi reforms in 2002 — but has not managed to introduce the level of flexibility that Germany has.

The end of the article reminds us that Germany’s export-driven growth and wage depression at home recall China. This is true, but hardly news: Martin Wolf, warning of global deflation, told his listeners this back in March.

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