The preliminary data released by Federal Statistical Office indicate that the German economy grew by 3.6% compared to 4.7% contraction in 2009. This comes as positive news compared to all the negative news flowing from the Europe over the past many months. So what does this mean for the Europe and to the EURO in particular?
Over the past few weeks we see EURO depreciating against major currencies, primarily because of the risk of default for many economies such as Greece, Spain and Portugal. However the depreciating EURO actually made goods made in Europe cheaper. This can be one of the reasons for increase in the growth of economy in Germany.
On the other hand, that makes one think whether the growth is sustainable?. Can EURO stay at current level? Also as German economy is heavily dependent on exports; it creates a very high risk scenario. The world is coming out of recession which started with the sub prime crisis, but the recent crisis in Europe indicates that it may take longer than expected. And if the world economy goes into a deeper recession, it may heavily impact the exports in Germany. This will inadvertently impact the growth rate in coming years.
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