09 février 2014 ~ 2 Commentaires

09-02-2014 : Success Made in Germany & News from Emerging Market

Hello everyone,

And welcome to my second article on the global economy and the mutation of it. In this article we will discuss about the recent election of Angela Merkel in Germany and the key of the very low unemployment rate and its counterparty. We will also discuss the preoccupying situation in emerging countries.

Germany: Hartz rules the key to a mitigate success

In 2000 Germany is facing a really difficult situation with an unemployment rate above 10% and a shrink on population able to work. Because of this situation the Schroder’s government nominates Peter Hartz head of a commission on charge of finding a way to lower the unemployment rate and re-launch the German Economy.

Between January 2003 and January 2005 Hartz reform of je German job market are adopted. This reforms is divided into 4 parts; the first part is dedicated to the training of jobless people and reinsertion of people on the market (January 2003), the second part facilitate the creation of firm for jobless people and extends insecure jobs (April 2003), the third part is dedicated to the administration with a raise on autonomy for local jobless management structure, in the same time Hartz III toughened the indemnity conditions for jobless people (January 2004). And finally Hatz IV (which was the most controversial part of the reform) is adoption on January 2005. This last part reduces the indemnity time for jobless people and creates one euro jobs which consist in jobs which are paid one euro per hour. Persons with a one hour jobs can continue to earn allocation to reach the strict minimum to “survive”.

The results of the Hartz reform are condensate into several Graphs:

Jobless Rate in Euro Zone

The Results on Jobless rate is tremendous with 2.5 million jobs created since 2005 and a Jobless rate at 5.2% in October 2013. The active population has also grown very rapidly thanks to the reforms of the job market.

However the picture is not perfect. Indeed the Hartz reform is also the source of a growing poverty and job insecurity. Partial time has progress more than 33% and is the biggest rate in the Euro Zone and the poverty has progress from 12.5% in 2000 to 14.7% in 2005

Poverty Rate

The recent election has confirm Angela Merkel (CDU party) as chancellor of Germany however the opposing party (SPD) has reached some part of the government and has been able to impose some of its willing. Among all willing: the creation of a minimum salary. 2014 will be the year of change.

Emerging markets: on the road for a new growing model

During the past decade the growth of emerging countries has been around 7.5% per year between 2003-2007. After the financial meltdown of 2008 the growth has been more moderate with 5.5% between 2011-2012. Today the situation is even more moderate with a growth forecast for 2015-2018 at 3.1%.

The slowing is due to diverse factors. Among them we can find the end of the economic adjustment with developed countries. Indeed during the past decade emerging countries fill the gap between them and the occident. Because of this phenomenon emerging economies has grown more rapidly than the occident with a consumption factor de-multiplied over the past 15 years. This period has also been characterized with a fast movement toward democracy, and mass consumption phenomenon.

GDP Growth Emerging

The today situation is quite different, over the past few year emerging countries was counting on occidental consumption to grow fast with raw material and cheap labor costs. But today we can observe that emerging countries are counting on inter-emerging countries consumption to exports their products. This mutation Is long and will durably modify the growing model of emerging countries.

The problem of the growth is due to diverse internal and external factors. For some countries such as India, Brasil, Turkey or South Africa the problem comes from the slackening of the internal demand which was not compensate by the exportation. For other countries such as Russia and China, the problem comes from the external demand (the exportations). The 2008 crisis has ending the fast growing period with massive exportation of oil and gas for Russia and manufactured product for China. However some countries have resisted to the slackening on both internal and external problem such as Indonesia and Mexico.

GDP decomposition Emerging

 

The second problem for these countries is that they already use some of their possibilities during the 2008 crisis. For example China cannot use the money machine because she already did that in 2008. Of course the debt of China is low but regional’s debts are reaching a troubling level. And if we look on the central bank side we can see that there is no margin because they already downgrade their rates at a critical level and in the same time inflation is coming back in the equation and the imminent ending of the Fed tapering policy finish to burry all hope of central bank intervention.

Interest Rate Emerging Market

As we said before emerging market is targeting g a new objective which is intra emerging markets commercial exchange in order to be less dependent to the developed countries but this process is quite long and the growth generated by this new idea is not here for now. The second option which is also targeting is the stimulation of the internal demand but this process is also long and fastidious.

 

 

2 Réponses à “09-02-2014 : Success Made in Germany & News from Emerging Market”

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