A new wrinkle for Europe

Since the eurozone crisis began to unfold, there has always been one country which could be counted on to shore up the most debt-ridden members. Germany has been the standout on the Continent, managing to post strong economic growth without gutting its social programs.

That economic miracle has been partially fueled by the fact that Germany is one of the few nations to enjoy a trade surplus with China, exporting precision engineered equipment and luxury vehicles to the booming Asian market.

But there are signs that China’s economy is slowing, despite Beijing’s recent pledge to the world that it would maintain growth. China’s imports slowed in December, according to a report on FT.com, and China’s trade surplus has been declining for the past three years.

Worse news for Europeans looking for German support: The economic powerhouse is not immune to massive un-funded liabilities. According to a report on Bloomberg.com this morning, Germany’s state pension plan alone has projected obligations to its existing populations of €7.6 trillion.

State-funded pension obligations in 19 of the European Union nations total €30 trillion—five times higher than their cumulative official debt—and the EU as a whole is either heading for a recession or is already in one.

Add to that the Continent has the oldest population on earth—it is projected that 35% of the population will be over the age of 60 by 2050.

Relying on German growth to fund bailouts for the rest of Europe is increasingly unlikely.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.