Germany's Declining Economy Highlights Flaws in Its Model While Southern Europe Thrives After Reforms
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Germany's economy, once seen as the eurozone's powerhouse, is now declining sharply due to overreliance on manufacturing and trade with dictatorships. Meanwhile, the so-called "periphery" economies of southern Europe like Spain, Italy, Greece, and Portugal are thriving.
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The periphery countries implemented reforms after the eurozone crisis that have made them more business-friendly and dynamic. Their economies are now more services-oriented and less exposed to crises.
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Households and companies in the periphery also cut debts sharply after the crisis, leaving them less vulnerable to rising rates now than debt-laden Germany.
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Italy's government debt is still very high but its economy is growing faster than Germany's. Greece has secured cheap bailout funds from Europe tied to reforms.
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Germany faces meager growth, tight debt rules limiting stimulus spending, and urgent challenges like transitioning auto manufacturing to EVs. Its economic model looks increasingly flawed.