Sunday, September 14, 2003

Could the UK Overtake Germany?

Essentially silly article in the British Daily Telegraph (what else would you expect from the DT?). But it is silly in an interesting way, since it is based on an interview with Nigel Griffiths, Tony Blair's Trade and Industry Minister. In the interview Griffiths speculates about whether the UK might overtake Germany during the next decade and become the world's number three economy. Whether this is in any way realistic is impossible to say (only time will tell), but what is interesting is the idea that a UK outside the euro might outperform a Germany that is inside, and this from a member of a government committed to joining!

Nigel Griffiths, the trade and industry minister, appears to be forecasting that Germany will experience a decade-long slump, based on his prediction that the UK economy may be bigger than its Western European rival by 2013. "I think that construction and manufacturing alone as sectors could ensure that within 10 years we overtake the German economy," Griffiths told The Telegraph. "We've got to see whether we cannot become the third biggest economy in the world in terms of gross domestic product. I think that is feasible."

The UK is currently the world's fourth biggest economy behind the US, Japan and Germany. However, Germany's economy is currently 30 per cent larger than the UK's. If the UK continues to grow to trend - at 2.5 per cent, according to the Treasury - it would eclipse Germany's economy only if growth in Germany stagnated for an entire decade. Maurice Fitzpatrick, head of economics at Numerica, the City consultancy said: "No European country has seen zero economic for an entire decade for the last 100 years. Only Japan in the past 10 years has a track record this bad."

But Griffiths added that he was lobbying to make overtaking the Germans official Government policy. "It is an aspiration which I am pressing to be part of our Governmental drive." He said he doubted it would become a manifesto pledge in "these specific terms", but that boosting competitiveness would be. The implication of Griffith's remarks may embarrass the Government, which is committed to adopting the euro when economic conditions are right. Selling that to voters would be difficult if the UK's prospects outside the single currency are so much better than Germany's. The UK's GDP is growing by 1.8 per cent, while the latest figures for Germany show a decline of 0.2 per cent. Industrial production in Germany fell by 2.1 per cent in June while in the UK it grew by 2.2 per cent.
Source: Daily Telegraph

Only Japan has performed this badly. Sounds ominous.

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