STOCK MARKET WATCH -- Wednesday, 9 January 2013

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22. Merkel Economy Shows Neglect as Sick Man Concern Returns

http://www.bloomberg.com/news/2013-01-09/merkel-economy-shows-neglect-as-sick-man-concern-returns.html

German Chancellor Angela Merkel’s economic machine is beginning to show signs of neglect.

As the continent’s growth engine and self-appointed fiscal paragon orders budget cuts for its peers, investors, economists and policy makers are starting to warn Germany is turning a blind eye to its own weaknesses. Joerg Asmussen, a European Central Bank board member nominated by Merkel, has gone as far as to predict a return to the status of “Sick Man of Europe” should they go unfixed.

Without Merkel and a largely supportive German electorate ready to back over 300 billion euros ($393 billion) in bailouts and guarantees, Europe’s debt crisis could have already broken up the single currency. At the same time, the drive to rescue Europe has distracted her from signs of economic drift at home as labor costs rise at the fastest pace in a decade, erasing most of the progress made under predecessor Gerhard Schroeder.

“Merkel has had to work with the cards that history has dealt to her and Europe has been a priority,” said Irwin Collier, professor of economics at the Freie Universitaet in Berlin. “But you have to do a lot of things at the same time, and it’s clear now things have to change at home too.”