Why German Economy Is Recovering Fast Than US

Perhaps there’s a lesson to be learned from the Germans whose economy has bounced back from the recession quicker that the US’s and who have a workforce that is, largely, working.

While the US pays its unemployed workers, the Germany government instituted a temporary program during the recession that compensated companies with benefits as an incentive to keep their staff on payroll.

When the slowdown began, the US unemployment rate was below Germany’s. But last month, the jobless rate in Germany fell to 7.5 percent, while it has jumped to 9.8 percent in the US.

“Because of the short-term working program, I didn't feel the downturn that badly,” said Markus Schalber, a metalworker at a John Deere factory in Mannheim, who benefited from the German government’s program, which ended last month, by keeping his job.

“I made some cutbacks, but the financial impact was small.”

Indeed, at Schalber’s workplace, productivity is humming, even though at the height of the recession, its sales fell 30 percent. Nonetheless, rather than lay off workers, which was done in the US to keep profits high, the Mannheim facility reduced the hours of 1,600 employees, thereby saving 200 jobs.

Meanwhile, thanks to the strength of exports from Germany, German stocks have gained 18 percent year to date, far above other big European nations and the US. A rebound in capital goods exports, exporting of machinery, is the major reason why Germany’s economy has rebounded more strongly from the recession that the US.

EBM Pabst, the world’s largest manufacturer of fans, is a case in point. A majority of its products are exported to the US, China and India.

And while much has been made of the crisis of the euro and the euro-zone nations, it definitely has its upside.

“The euro crisis has at least some kind of benefit on that front that the euro is not appreciating as has been feared and therefore it is helping not only German exporters but European exporters on the whole,” said Stefan Schneider, chief international economists for Deutsche Bank .