Top Reasons for Growth in German Economy in 2011

Gloom and doom—two words that have been used countless times to describe Europe’s economic outlook. The U.S. debt crisis has spawned similar crises across the globe, and some believe the euro is on the brink of implosion.

But while the economies of Portugal, Ireland, Italy, Greece and Spain continue to spiral downward, things are much more rosy for central Europe, specifically Germany. The German economy has not only remained strong, but experienced record-breaking growth in 2011. A December 27, 2011 article featured in the popular German online newsmagazine Spiegel Online stated that Germany exported goods worth over $1.3 trillion in 2011—its highest figure to date. What’s more, an unprecedented 41.6 million people were employed in Germany in 2011, also a history-making figure.

Source: albatross invest

The state of the German economy, compared to its fledgling neighbors in the euro zone, has many wondering what this country is doing differently to not only survive but thrive amidst Europe’s economic turmoil. According to Pamela Jackson, manager of communications for the German American Chamber of Commerce of the Southern U.S., Inc., one factor is simply responsible money management.

“They haven’t borrowed more than they can handle,” said Jackson. “They live within their means—that’s what German companies do. They normally tend to do well in situations like this because they haven’t overextended themselves.”

Top Countries in Manufacturing Employment Supported by U.S. Affiliates of Foreign Companies, 2009 (U.S. Department of Commerce)

Thilo Zimmermann, a managing partner with the German investment group albatross invest, says it’s not just Germany that has remained strong during the downturn and that a country’s core industries play a vital role in determining how it will fare in a less-than-favorable economy. He says that the export-oriented countries such as Germany and partly France are growing in step with the markets they serve, like the automotive sector.

“You see a different picture in the United Kingdom, for example,” Zimmermann explained. “They very much depend on the financial sector. And here, we differentiate…we dilute the real economy and the financial sector economy. From a financial sector point of view, things look much, much different than if you’re active in industry (like exporting).”