Long the economic engine of Europe, Germany is now the EU’s worst performer, with GDP growing by only 1.6% since 2017 and actually falling for each of the last two years.
Germany’s decline is largely due to its “green” energy policies, which have made it uneconomic to manufacture products in that country.
At the same time, welfare spending has risen rapidly.
German Chancellor Friedrich Merz is clear-eyed about what needs to be done. He called on both the Social Democratic Party (SDP) and the Christian Democratic Union (CDU) to commit to making tough decisions and to forming a joint anti-migration and business-friendly coalition path.
But whether Germany’s governing class is up to the task is doubtful.
No surprise there! Sounds like their collapse went exactly according to the socialist “plan”!
Merz’s suggestion is just common sense that could’ve been heeded a long time ago, but it wasn’t, because they didn’t actually want good results.
They ignored it on purpose! Now they’ll just have to depend on their globalist heros to “rescue” them.
Isn’t that Special!
This was easily predictable, but one thing puzzles me. The soundness of a currency rests on the strength of its economy. Why then is the Euro (and, for that matter, the UK Pound) so very strong?
This is an AI response:
That’s a really good question — and it gets at the heart of how currency values don’t always move in line with the “real economy.” A weak economy does not necessarily mean a weak currency. Exchange rates are driven less by current GDP growth and more by monetary policy, interest rates, investor confidence, and relative comparisons. Here are the main reasons why the euro and pound can look strong right now despite sluggish European and UK growth:
1. Interest Rate Differentials
The European Central Bank (ECB) and the Bank of England (BoE) have kept policy interest rates relatively high to fight inflation.
Higher interest rates mean higher returns for investors who hold euros or pounds, which attracts capital inflows and pushes up the currency’s value.
Even if growth is weak, as long as rates are high (or expected to stay higher than in the U.S. or Japan), currencies remain supported.
2. The U.S. Dollar Effect
Currencies are always valued relative to others, especially the dollar.
If U.S. inflation is sticky or the Fed signals possible rate cuts sooner than the ECB/BoE, the dollar weakens — making the euro and pound look stronger by comparison.
Similarly, weakness in other global currencies (like the yen or yuan) can make the euro/pound relatively “safe.”
3. Inflation and Real Returns
Europe and the UK still have higher inflation than before, which keeps pressure on central banks to maintain restrictive policy.
Investors often think: “Even if growth is weak, the ECB/BoE won’t cut rates quickly.” That supports their currencies.
4. Safe-Haven Flows (to a degree)
The euro in particular is a major reserve currency.
In times of global uncertainty (China’s slowdown, geopolitical tensions), some investors prefer holding euros or pounds over riskier emerging-market currencies.
5. Markets Price the Future, Not the Present
Currency markets are forward-looking. A weak economy today might not matter if investors expect improvement or structural stability.
By contrast, if the U.S. looks like it’s heading toward fiscal stress or political uncertainty, the euro/pound can strengthen even while Europe/UK growth is poor.
In short: The euro and pound are strong right now mainly because their central banks are holding higher rates for longer than markets expected, and because the dollar (and some other currencies) have weakened relatively. Weak economies don’t automatically mean weak currencies — sometimes it’s the opposite, because central banks won’t cut rates quickly when growth is fragile but inflation is still a concern.
In short: The euro and pound are strong right now mainly because their central banks are holding higher rates for longer than markets expected, and because the dollar (and some other currencies) have weakened relatively. Weak economies don’t automatically mean weak currencies — sometimes it’s the opposite, because central banks won’t cut rates quickly when growth is fragile but inflation is still a concern.