A coronavirus-induced plunge in German exports and a fiscal U-turn by Chancellor Angela Merkel are accelerating a long demanded rebalancing of Europe’s largest economy
BERLIN - A coronavirus-induced plunge in German exports and a fiscal U-turn by Chancellor Angela Merkel as she seeks to cement her place in history are accelerating a long demanded rebalancing of Europe’s largest economy.
But with the coronavirus pandemic disrupting trade across the globe and Merkel turning Germany’s traditionally cautious fiscal policy upside down, its current account surplus - a wider measure of international flows - is shrinking fast, according to projections from its central bank and finance ministry.
“Merkel is worried about two things: that a second wave of infections could force authorities to implement another lockdown and that Europe could break apart because of the crisis,” said one of the officials who spoke on condition of anonymity. The German central bank expects the pandemic to slash exports by more than 13% in 2020 while imports are only predicted to fall by 7%.
Germany’s large stimulus package, financed with record new borrowing of 218.5 billion euros this year, is having a clear effect this year, but the future budget path is not certain.
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