Tue Jan 25th, 2011 at 08:34:17 AM EST
German economic growth is rocketing ahead while most of the eurozone is in difficulty, says Eurointelligence this morning:
Germany, like China, is hitting the speed limits
The interesting question about Germany is not so much whether the economic recovery is for real (it is), but it is whether it is sustainable. On Monday, the Ifo index reached a post-unification record, and yesterday, the eurozone PMI also raced ahead, based on good performances by Germany and France, but also showing a widening gap between core and periphery.
Eurointelligence refers to a report in the Financial Times that shows the divergence in this chart:
And the further question (that underlines the lack of labour mobility within the single-currency area) is whether the ugly spectre of (gasp!) wage inflation will strike the speeding mercantilist economy:
FT.com / Europe - Germany powers eurozone services growth
Underscoring Germany's revival, Ernst & Young, the financial services firm, reported that almost three-quarters of the small and medium-sized companies in the country's industrial Mittelstand were having difficulties finding enough qualified workers.
Its survey of 3,000 enterprises put the cost of skill shortages in terms of lost revenues at almost €30bn ($41bn) a year. German business organisations have called for easier immigration rules for skilled workers to tackle the shortage.
Are the limits of German competitive deflation in sight?