Worries that Germany is becoming the “sick man of Europe” have resurfaced over the past few weeks. While we think the German economy is heading back into recession this seems too alarmist. In many respects Germany is in a much stronger position than it was in the late 1990s and early 2000s, when it was first labelled Europe’s sick man. And some of its recent troubles are due to cyclical rather than structural factors. Meanwhile, we expect to learn next week that euro-zone core and headline inflation both edged down a little in August.
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