The blog has been worrying for some time about what will happen when governments end their stimulus programmes. It does not share the optimism of financial markets, that these will provide to be the “escape velocity” for a quick return to 2003-7 Boom conditions.
Today’s data from Germany seems to support its concerns. According to Roderich Egeler, German statistics office president, “the German economy contracted for the first time in six years – and at a pace not seen before in post-war history“. The office estimates GDP declined 5% in 2009, and says the economy “stagnated” in Q4, following the end of the pre-election government support measures, such as the car scrappage scheme.
Equally, the Wall Street Journal reports that small/medium size companies (SMEs) in Europe and the USA are finding it increasingly difficult to obtain vital loans to keep their businesses alive. These are critical players in the chemicals value chain, accounting for 70% of EU private sector workforces, and 49% in the US. As a result, the Journal says that insolvencies and job losses are likely to continue to rise.