NURENBERG, Germany - The signs of the time indicate growth again. In 2010, the majority of the members of the euro zone succeeded in leaving behind the consequences of the global financial and economic crisis. The leader is Germany with gross domestic product (GDP) growth of 3.8 percent. The euro region expects an increasing worldwide demand for products and services in 2011, and the industry is suitably prepared. The stability of the euro promotes exports, which are important for the euro zone.
German companies in particular are profiting from the worldwide recovery. The machinery and plant manufacturers and the automotive industry are currently achieving large export growth. For example, Volkswagen, Daimler and BMW report huge rises in sales, and even shortened the holidays over Christmas. The orders in the component supply industry are increasing accordingly. The companies’ order books are bulging, the machines are running hot, and there is already a shortage of manpower in some industries. The development in the chemical, electrical engineering and building industries is similarly positive. The latter is benefiting from energy-saving renovation work on buildings and the large demand for solar and photovoltaic products. The present euro exchange rate is also fueling the export of products made in Germany, and firms are investing again after a long phase of restraint. For example, equipment investment has risen by some four percent every quarter since the beginning of 2010.
The latest figures show that the economy has not only regained a foothold in Germany. The economic power of Germany’s neighbors, Belgium, Denmark, France, Luxembourg, the Netherlands, Austria and the Czech Republic, increased by approximately two percent in each country in 2010. Growth in Slovenia and Slovakia also picked up speed in 2010. Although the industry there cannot yet utilize its production capacities to the full again, the countries are already investing in new machinery and production plants to improve their competitiveness.
Finland proved its capacity once again with some three-percent growth. This Scandinavian country is one of the most competitive economies in the euro zone. A strict cost-cutting plan, along with privatization and investment in the high-tech sector and the educational system, rescued the country from bankruptcy after trade with Eastern Europe came to an end, triggered by the collapse of the Soviet Union. Today, Finland is distinguished by its extremely low national debt and small budget deficit. The country’s most important industries include the metal, electronic, timber and paper sectors.
The difficulties experienced by individual countries in the euro zone in 2010 were offset by loans from the Eurogroup. At the same time, the body of the European Union, in which the euro zone states coordinate their fiscal and economic policy, imposed strict rules on the countries in deficit. For example, Greece, which drew billions of euros of aid in April of last year, is currently preparing reform packages to get its budget deficit under control. Ireland also took cover under the Eurogroup’s rescue scheme at the end of last year after the Irish GDP had shrunk by 7.6 percent. The Irish bank crisis was to blame for this; the actual economy of the island state is basically intact. Experts from the International Monetary Fund (IMF) expect the Irish economy to start growing again as early as 2011. Spain, which is also shaky, could even manage the turnaround through its own efforts in 2011. The government in Madrid has adopted a strict cost-cutting program and is strengthening the growth forces for companies at the same time. Spain intends to reduce the national deficit to three percent by 2013 with fundamental reforms of the employment market, product markets, finance sector and pension system.
The euro has proved to be a stable currency despite economic upheavals. Disregarding the good economic situation in major euro countries like Germany, the inflation rate in the euro zone is below two percent. The euro’s external value is also in good shape. The euro is currently worth 1.29 U.S. dollars, which is still approximately 12 cents above the so-called purchasing power parity, i.e. the exchange rate at which the same quantity of goods can be purchased with a certain sum of money in the two currency regions. Experts consider it unlikely that the national deficit crises of individual countries could break up the monetary union. The euro gives its members too many advantages for them to accept the risks of failure.
The number of customers from emerging economies who are interested in European products is growing. This is because the economies in China, Brazil and the emerging countries of Southeast Asia recovered more quickly than in the industrial countries. In addition, Europe should be able to expand its position as leading supplier of eco-technologies in the future. As recently as December, the government in Peking announced its intention to support sustainable growth in the future. India also has excellent prospects of becoming one of the leading users of green building technologies.
This analysis was provided by NürnbergMesse, one of the 20 largest exhibition companies in the world and among the top ten in Europe. The portfolio covers some 120 national and international exhibitions and congresses and approx. 35 sponsored pavilions at the Nuremberg location and worldwide.
Good Economic Prospects Forecast for Euro Zone
March 6, 2011