The US economy has posed a serious challenge to the world economy as never before through its domestic sub-prime crisis. The ripples of the credit crisis have reached even the shores of Germany. Towards the end of 2006 there were predictions that the German economy is bound for a positive economic breeze. But 2007 shattered all that with the credit crisis in the far away land US. In the recent statement of German Economics Minister, Michael Glos, it is very clear that the present 2% GDP growth cannot be accomplished during 2008. If Germany, one of the major economies of Europe feels pessimistic about its growth the pressure on other EU member states will be greater in the coming months.
The UK and Germany are the two nations in the EU which provides higher minimum wages on per hour basis. Yet Germany’s minimum wages did not match that of the UK which stands at $11. But German employees may look forward to more earning power in 2008. Germany’s Social Democratic Foreign Minister and Vice Chancellor, Frank-Walter Steinmeier, has already come out in favor of a national minimum wage hike. He claims that someone who works all day should be able to live on with that pay. Thus indirectly referring to the Merkel government’s increase in value added tax or sales tax from 16 to 19% in turn reflected on the inflation adversely.
In a survey conducted by Droege & Comp with a sample of 1,200 managers from six European countries, still put Germany ahead of Switzerland and the UK as a better place to do business. However, businesses are neither behaved by surveys nor economic assumptions, but to a great extent by market sentiments. The economic edge currently Germany has over its other EU states is the only wind blowing towards it and with that prop, the country may sustain growth.