Europe will be the big winner of Brexit, Germany’s economics minister said, as UK-headquartered companies move to the continent and Emmanuel Macron’s reform push leads to a new “spirit of revival” that will benefit the whole of the EU.
Brigitte Zypries made the prediction on Wednesday as she revealed the German economy was growing at a faster rate than previously estimated. The government now expects gross domestic product growth of 2 per cent this year, up from a forecast of 1.5 per cent, as Europe’s economic powerhouse continues to charge ahead. The economy will also grow by 1.9 per cent in 2018, she said.
Ms Zypries said Germany’s economic boom had “gained momentum and become more broad-based”. The economy would “also remain on a growth trajectory in the years to come”. “Germany is doing well and the next government must ensure that it continues to do so,” she said.
The global economic recovery had stimulated German exports and led to an increase in private sector investment: incomes were rising and unemployment falling. The number of people in work had grown by 2.5m during the past four years.
The strong economy provided a positive backdrop for last month’s Bundestag elections, in which Angela Merkel won a fourth term as chancellor. But her conservative bloc suffered its worst election result since 1949 as voters disappointed by her liberal refugee policy defected in droves to the rightwing populist Alternative for Germany.
Brigitte Zypries:’ Europe will rather be the winner’ from the UK’s departure from the EU © Getty
Ms Zypries brushed off any possible negative effects from Brexit, saying various studies had shown that “Europe will rather be the winner” from the UK’s departure from the EU. She said the government had noted that “many companies are moving their headquarters from the UK to Germany”.
Philipp Steinberg, the ministry’s head of economic policy, said Brexit would also open the way for a “new political awakening” in continental Europe — a spirit already evident in Mr Macron’s call for fundamental reform of the EU last month.
The two were speaking days after Germany’s largest business lobby warned that German companies operating in the UK should make provisions for a “very hard Brexit”.
Joachim Lang, managing director of the BDI, said the British government “talks a lot but doesn’t have a clear concept” on leaving the EU. He said the Conservative conference in Manchester had shown “just how split” the party was over Brexit.
Germany is Europe’s largest economy, accounting for almost a third of economic output in the eurozone.
The economics ministry said German exports would rise 3.5 per cent this year and 4 per cent in 2018. Strong domestic demand meant imports would grow faster than exports, — narrowing Germany’s current account surplus, which is expected to be the highest in the world this year.
The ministry said the surplus would fall from 8.3 per cent of GDP in 2016 to 7.4 per cent next year.
Rising employment combined with an increase in wages would lead to higher consumer spending by private households, which would increase 1.8 per cent this year and 1.6 per cent next, the ministry said. It also said the number of people in work would rise to a record of 44.8m next year, while the number of unemployed would reach 2.5m, a rate of 5.5 per cent.
Joerg Kraemer, chief economist at Commerzbank, said: “We are enjoying quite a strong upswing in Germany, no longer only driven by exports but primarily by consumption. He said the boom would lead to rising tax revenues, which could increase the temptation for the new government to spend more on boosting consumption. “They should go for more investment instead,” he said.