Germany’s economy has had a rather rough ride in the last couple of years. A lot of the problems from weak investment to rising unemployment had not only to do with changing global markets and slow German coordinational reaction, and reappearing distributional conflicts in the light of slower growth, but also with a fundamental shift in credit regulations, called Basel II.
Grossly simplyfying, increased rationalisation, as well as „locusts“, were just different strategies to handle the need for a boost in the equity vs dept capital share imposed by the epochal switch in corporate control away from banks to less hierarchically structured „capital markets“.
It was a tough time, no kidding. But as even the Economist, whose reporting about non British European economies is often informed by a bias Edward Said might have labeled „Continentalism“, noted in this week’s issue , things are beginning to look up a little. Tonight, Reuters informs us that the cabinet silently passed the implementation of the new rules into German law, which can only mean that most German companies are now able to deal with them.
There will be a long debate in economic history one day that will focus on the question whether it was actually necesary to do what was done, given the price so many paid in the 1990s and early post millenium years. But that’s for the future, for now let’s enjoy the fact that things are indeed looking brighter again.