Exports Help German Economy Beat Expectations

Exports are driving the German economic boom, but an expansionary fiscal policy laid the basis for market oriented growth. See, from last year, "Germany agrees biggest economic stimulus package since World War II":

The plan, which Christian Democrats and Social Democrats hammered out late Monday, includes €17-18bn in infrastructure investments for education and highways, and tax cuts for firms and individuals.

It also grants families a one-off extra child benefit payment, cuts health insurance costs, simplifies rules for creating temporary jobs, and provides subsidies to encourage purchases of environmentally friendly cars.

And Germany has actually been cutting taxes for a decade, "German businesses enjoyed record tax cuts in last decade."

See also NYT (FWIW), "Defying Others, Germany Finds Economic Success":

Germany has sparred with its European partners over how to respond to the financial crisis, argued with the United States over the benefits of stimulus versus austerity, and defiantly pursued its own vision of how to keep its economy strong.

Statistics released Friday buttress Germany’s view that it had the formula right all along. The government on Friday announced quarter-on-quarter economic growth of 2.2 percent, Germany’s best performance since reunification 20 years ago — and equivalent to a nearly 9 percent annual rate if growth were that robust all year.

The strong growth figures will also bolster the conviction here that German workers and companies in recent years made the short-term sacrifices necessary for long-term success that Germany’s European partners did not. And it will reinforce the widespread conviction among policy makers that they handled the financial crisis and the painful recession that followed it far better than the United States, which, they never hesitate to remind, brought the world into this crisis.

A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis. But the roots of Germany’s export-driven success reach back to the painful restructuring under the previous government of Chancellor Gerhard Schröder.

By paring unemployment benefits, easing rules for hiring and firing, and management and labor’s working together to keep a lid on wages, Germany ensured that it could again export its way to growth with competitive, nimble companies producing the cars and machine tools the world’s economies — emerging and developed alike — demanded.

Plus, Astute Bloggers focuses on Germany's recent social austerity, "MERKEL'S BUDGET CUTS WORKED: GERMAN ECONOMY GREW AT FASTEST PACE IN 20 YEARS." And Wall Street Journal on the continental effects, "Germany Propels Growth in Euro Zone":

The euro-zone economy tore past the U.S. in the second quarter thanks to a 9% jump in German growth—but the surge is expected to fade fast, adding to concerns about the global recovery ....

Germany's robust performance, driven by demand for its exports, stood in contrast to continued malaise in Southern Europe, where countries such as Greece are struggling to repair public finances. The mixed picture in Europe, coupled with concerns that the U.S. and Asia are slowing, has many economists, as well as the European Central Bank, predicting a second-half slowdown for the euro zone.