Germany, Startups, and Inflation

  • Wie Gehts mit Deutschland?
  • Jump-Starting U.S. Startups
  • Big Data Is Changing Inflation

Fresh from a family vacation in Germany, Ryan shares an outlook on the country.

Foreign drivers in Germany are often excited about the unchecked speed limits on the Autobahn. But in my rental car, I was most surprised by the well-controlled traffic within cities. Unlike in the U.S., where traffic lights are positioned high in the air in the middle of intersections, urban traffic lights in German cities are mounted only on the near sides. By requiring drivers to stop short to see the signals, this arrangement prevents them from blocking crosswalks or creeping out ahead of green lights. It is an elegant way to force defensive driving.

As an economy, however, Germany may be behaving too cautiously. It ended 2018 on the brink of a recession, with an economic contraction in third quarter 2018 followed by flat growth in the fourth quarter. Its growth over the past two quarters lagged that of the overall eurozone, a concerning trend for the country that accounts for the largest share of the region’s economic output.



The slowdown was driven by uncertainty surrounding global trade. Germany is renowned for producing high-quality, specialized goods, particularly in industrial sectors. German wares are shipped worldwide, often to equip other countries’ manufacturing facilities, with China becoming a large customer.

But as trade battles have taken a toll on China, Germany’s fortunes have flagged. This is a worry for the rest of the eurozone; Germany has been providing substantial amounts of credit to Italy and Spain through the European banking system, helping them through difficult times. If this support were curtailed, Europe’s economic equation becomes much harder to solve.

Some of the slowdown evident in the second half of 2018 was due to transient factors. A dry summer led to low water levels in the Rhine River, a primary route German factories use to receive raw materials and ship finished goods. As shipments slowed or were rerouted, output fell. The important automotive sector, meanwhile, slowed while adapting to comply with new emission requirements that took effect in September.