Monday, August 21, 2006

Unfortunately, You're About to Ruin This Recovery, Mrs. Merkel

Angela Merkel notes that Germany seems to have recovered from more than a decade of stagnation.

It is true that although Germany's growth is still slow by the standards of most of the world, it have picked up in pace significantly the recent year.

But there is a significant risk that Mrs. Merkel's unwise decision to raise the VAT by 3%:points will kill this fragile recovery, just like the Japanese VAT hike in 1997 killed their recovery. At best, it could merely slow it, but at any rate, her policies will make Germany's economy a lot worse than otherwise.


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