Could Germany's exports to emerging countries save the euro zone?

- "Domestic demand in euro-zone countries will very likely remain weak, due to the slowdown in wage growth, sluggish investment, the increase in household savings and fiscal consolidation."
- "But there is at present a sharp increase in exports, especially in Germany's exports, due to the rapid pickup in demand in emerging countries (and also the United States). Could the euro zone enjoy growth driven by exports (from Germany)?"
- "For this to happen:
• demand from emerging countries must not weaken too much;
• the euro zone's exports to emerging countries must be sufficiently large to drive the euro-zone economy (directly, or through the knock-on effects on the other euro-zone countries of a recovery in Germany due to its exports), and the import content of these exports must not be too high."
- "Emerging countries' imports (and activity) are clearly slowing down significantly by comparison with the start of 2010, but emerging-country growth is likely to remain fairly robust. Most strikingly, the import content of the euro zone's exports to the emerging and oil-exporting countries seems extremely high. All in all, it is therefore likely that exports to emerging countries will have only a modest effect on euro-zone value added."

Natixis Flash Economics 390 20100804

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