Is Germany almighty or is Germany finished?
Well, certainly not finished but even more certainly: not almighty! One way to look at an economy is to ask whether it has the capacity to employ its people. Well, for most of the time since WWII, Germany has only been able to employ its people because it had/has so many customers outside of Germany. Let some of those customers break away and German unemployment will skyrocket.
Germany is now in its 3rd year of economic boom. Also, Germany benefits from extremely low interest rates on its public debt. And, last but not least, some of Germany’s interest expense doesn’t even flow through the budget because the debt is placed in automous institutions (like the KfW). And yet, Germany is still far from balancing its budget. Now if one can’t balance one’s budget in wonderful times like this, how is it going to be when the economy turns down?
Germany has built up a welfare state whose costs cannot be sustained on a long-term basis. Without things like Agenda 2010 or the increase of the retirement age to 67, the critical point would already have been reached.
If you are not worried by now, look at Germany’s demographics and you will be scared. Today, there are 43 million working people in the age group 15-64 years. By 2050, that number will have declined to 33 million people. Germany is going to be a VERY old country!
But in one aspect Germany is in the same class as everybody else: it has to take up new long term debt in order to be able to pay off maturing debt (and interest).