European Economy. Economic Papers. Germany's growth performance in the 1990's

D
(1)
F
I
UK
EUR
(2)
EU
(3)
US
JP
Net Exports (annual averages)
1971-2000
0.2
0.1
0.1
-0.2
0.2
0.1
-0.1
0.2
1991-2000
0.1
0.3
0.3
-0.3
0.3
0.2
-0.4
0.1
1991-1995
0.0
0.4
1.0
0.5
0.7
0.6
-0.1
0.0
1996-2000
0.3
0.2
-0.4
-1.1
0.0
-0.2
-0.8
0.2
Domestic Demand (annual averages)
1971-2000
2.1
2.4
2.4
2.5
2.4
2.4
3.3
3.2
1991-2000
1.8
1.5
1.3
2.6
1.6
1.8
3.6
1.3
1991-1995
2.0
0.7
0.3
1.3
0.6
0.8
2.4
1.4
1996-2000
1.5
2.3
2.3
3.9
2.5
2.8
4.8
1.2
(1)
Data up to 1991 West Germany.
(2)
Euro-area excluding Germany, Greece, Ireland, Portugal and Spain
(3)
EU excluding Germany, Greece, Ireland, Portugal and Spain
Source : Commission services
These findings corroborate the notion, derived previously, that external trade has a
comparatively high importance for the overall development of the German economy.
Apparently this pattern has not changed with re-unification. Furthermore, it appears that the
popular hypothesis that the German growth slowdown in the 1990s was caused by a sustained
loss in external competitiveness in the aftermath of re-unification needs further qualification.
Obviously, the German export sector was able to retain its competitiveness in the longer run

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27
-3
-2
-1
0
1
2
3
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
80
84
88
92
96
100
104
108
112
Grow th Contribution of Net Exports 
Terms of Trade
despite generally unfavourable exchange rate developments and a sharp rise in unit labour
costs in the first half of the 1990s
13
. As a corollary these results suggest that the slowdown in
output growth in Germany in the second half of the 1990s was predominantly the result of a
deceleration in domestic demand rather than in net exports (see also the lower panel of Table
1.9).
To see more clearly which demand components were particularly affected, Table 1.10 gives a
further breakdown of domestic demand. The table shows that in Germany the contribution of
private consumption to output growth was weak in comparison with most other EU countries
and even more so in comparison with the US. However, such a difference should not be over-
emphasised as it reflects also institutional features of the provision of certain goods and
services such as education and health care (i.e. public or private provision). More important is
the development over time. In this regard it is noteworthy that during the period from 1996 to
2000 the contribution of private consumption to growth in Germany fell significantly below
its long-term average. Such a drop did not occur in the EMU/EU partners countries, nor in
the US. As a consequence, more than one half of the output growth differential between
Germany and its EMU/EU partners in the second half of the 1990s is explained by this
demand category alone.