Brexit vote to have ‘limited’ economic impact on Germany

Britain’s vote to leave the European Union should have limited immediate economic impact on Germany, the country’s central bank said on Monday, noting the mood among enterpreneurs remained positive.
The Bundesbank expects the German economy to have continued to expand over the summer, underpinned by exports, industrial production, construction and consumer spending.
“Against the background of an intense public debate about the economic effects of the announced exit of the United Kingdom from the EU, German companies’ positive expectations have so far only been modestly dampened,” the Bundesbank said in its monthly report.
“This supports the view that the economic consequences of the Brexit vote for Germany will be limited, at least in the short term.”
Germany’s gross domestic product grew by 0.4 percent in the three months to June, data showed last week.
While this was less than in the first quarter of the year, it still put Germany well ahead of its peers and of analyst expectations.
Shrugging off calls from euro zone partners for Berlin to increase its spending, the Bundesbank also said that a public stimulus program in Germany would contribute little to lifting global growth.
“It appears that a program of public spending in Germany would not be the most appropriate tool to help give a strong stimulus to the international economy,” the central bank said following a study into the issue.
Increased public spending would boost German domestic demand, and thereby trade with “some small and medium-size economies in the surroundings of Germany and in central Europe.”
But the effect would be “weak” for the eurozone’s biggest economies like France, Italy and Spain, said the Bundesbank, adding that it would also have little impact on Portugal and Greece.
The bank grounded its arguments in a study that simulated an increase in German public investments by up to 1.0 percent of gross domestic product over two years.
But the study concluded that “German economic policy cannot resolve the external economic inequality of another country.”
The bank has always been skeptical about recurrent calls from the International Monetary Fund as well as European partners like France for Berlin to increase its public spending.
Such calls have grown louder in recent years as Europe’s biggest economy has seen healthy growth — with the Bundesbank expecting GDP to expand by 1.7 percent this year, while the eurozone is struggling with low inflation and tepid growth.
Berlin has also come in for criticism for profiting from European demand through its popular “Made in Germany” exports while doing little to contribute to lifting the single currency area’s growth.

Source: Arab News