Germany defies euro with exports, but harder work vital: OECD
FRANKFURT (AFP) — German exports have spurred the economy despite strength of the euro, but social policies should be adjusted to encourage Germans to work and study more, the OECD said on Wednesday.
The OECD expected growth of the biggest European economy to slow sharply "from 2.5 percent in 2007 to 1.5 percent in 2009," it said, shaving downwards estimates released in December of 2.6 percent for 2007 and 1.6 percent for 2009.
Productivity had to rise in the energy and transportation sectors, and education for the poor and immigrants needed to be improved, the Organisation for Economic Cooperation and Development said.
Data on a solid German trade surplus released separately on Wednesday showed that exports of machinery and other goods used to make consumer products continued to help the country plow ahead amid slower global growth.
But the OECD said the workforce could be used to greater effect with longer hours and increased efficiency.
To achieve this, policies needed to be adapted, including resolving tax disincentives, providing greater access to childcare for working mothers, and increasing competition in the energy and transport sectors, it added.
In its overall review, the OECD said: "Solid foundations have been laid for the continuation of the upswing" that got started in 2004.
Exports have boomed owing to German specialisation in capital and intermediate goods used to make other products that are in demand amid global economic growth and which have not been seriously affected by the rise of the euro, it added.
But, referring to the capacity of the economy to grow without inflation which is taken by economists as a mesure of productivity and efficiency, it said that growth in the rate of Germany's potential output had to rise further. To achieve this, "there is still considerable scope to increase hours worked per capita," the OECD said.
In addition, "improving education outcomes, including by reducing the impact of socio-economic background," was also crucial to sustaining growth and social cohesion, it added.
