Germany's boom and Europe's problems

OK, so there's no harm in being a bit euphoric. Germany has seen its economy expand for eight years now. That's not bad at all and reflects the country's development since it plunged into a deep recession in 2009 during the global financial crisis. It also reflects developments in a Germany led by Chancellor Angela Merkel and governed by various coalitions of her conservative bloc with the Social Democrats and the pro-business Liberal Democrats.

Hats off to the many companies which were not discouraged by a policy that couldn't exactly be called pro-business.

Germany has become Europe's powerhouse again, leaving behind its image as the sick man of the Continent which it was at the turn of the century. Tough labor market reforms brought about by former Social Democrat Chancellor Gerhard Schröder helped the country turn the corner. The Social Democratic Party is still suffering from the consequences of driving that reform package. It is indelibly associated with the party and still causes a lot of internal bickering.

Something has to happen, but ...

In the face of the positive economic parameters, there's little left now of the reform spirit that was in evidence roughly a decade ago. The longer the grand coalition governed the country, the less it thought about how to make Germany fit for the future. Instead, Berlin focused on telling others what would be good for them (ask the Greeks; they will know what I'm talking about).

Former Finance Minister Wolfgang Schäuble was always proud of being able to present a balanced budget, but his savings drive has led to creaking infrastructure, ill-equipped schools and universities and delays in expanding Germany's broadband network.

But back to the impressive figures. It's not only Germany, but also fellow eurozone nations that have returned to a path of growth. That's good news, given that even debt-stricken Greece has logged a small expansion as have other former problem children such as Spain, Portugal and most certainly Ireland. Italy remains a cause for concern, though.

The Italian Job

Not even ECB chief Mario Draghi, an Italian himself, has managed to push his country onto a growth path. But he's certainly tried hard. The ECB's current monetary policy is first and foremost a gift to Italy. Too bad, though, that the nation hasn't risen to the challenge of enacting critical economic reforms. Now Draghi's days at the helm of the ECB are numbered, and that's bad for Rome.

The country is the European Union's Achilles' heel, and the next eurozone crisis is bound to start there. The Italian economy has been on a downward slide for 20 years, while Germany has seen its economy grow by 25 percent over the past 18 years.

Italy's banks are of full of non-performing loans. Many companies are no longer in a position to pay back their credits, affecting the lenders' balance sheets. It's a vicious circle and the stuff that the next big crisis in the eurozone may be made of.

For the economic boom in Germany to continue, wise decisions will be needed at the top. Whether these will come from those now trying to put a new government together very much remains to be seen. What has been leaked from the exploratory talks so far (and we're not even talking of fully-fledged coalition talks yet) doesn't bode well.