A very interesting article from BBC.
BBC NEWS | Business | Why are France and Germany out of recession?
Successive British Governments have praised the ability of the British economy to respond when times get tough.
They have highlighted its flexibility in handling economic problems.
As a result, many people are wondering why Germany and France emerged from recession before the UK?
Is there a big difference between the economies?
Britain, along with the US, was right at the heart of crisis that led to the global downturn.
Germany is the world's biggest exporter
Our financial sector is much larger than those of our main EU rivals, so when the credit crunch struck, the impact was much more serious for the UK.
Germany and France have experienced problems in their banking sectors too, but unlike the UK, they have not had to intervene in the sector to the same extent.
There are other differences too.
Germany is the manufacturing heart of Europe. It relies upon exports to fuel growth. So its biggest problem has been the huge fall in global commerce, which the World Trade Organisation predicts will have contracted by 10% this year.
That fall led to a sharp contraction in German growth. In the first 3 months of the year, while Britain's economy shrank by 4.9% on an annualised basis, the contraction in Germany was 6.7%.
From the height of the boom to the depth of the recession, the fall in output in Germany was much greater than in the UK.
But as the global economy has started to recover, German firms have been cranking up production lines and rebuilding stock levels.
They have also been responding to a pick-up in domestic demand, all of which has contributed to growth.
Meanwhile, the financial sector generally is recovering too, but few expect it will ever return to the levels of activity seen prior to the credit crunch, so that will have a lasting impact in the UK.
So was all the money the UK government spent on stabilising the economy wasted?
According to the latest figures from the International Monetary Fund, the UK's discretionary fiscal measures, essentially the cut in VAT, accounted for around 1.6% of total UK economic output this year. It will fall to zero next year as the VAT cut will disappear.
The German scrappage scheme has been a big boost for its car industry
Germany also provided 1.6% of GDP, but it will add a further 2% next year. The French measures are more modest, amounting to around 0.7% both years.
So the British economy may have enjoyed an early fiscal boost, but it was only on a par with Germany and, unlike France and Germany, that boost will not be continued into 2010.
France and Germany have also benefited from what economists call automatic stabilisers.
Their social security systems are more generous than the UK's and this has provided more support to consumers.
It is one of the reasons why they argued they did not need to follow the UK with headline-grabbing measures to stimulate the economy.
But one area of direct intervention does appear to have helped German growth.
Its car scrappage scheme has been credited with turning around the fortunes of its automotive sector. At 5bn euros ($7.1bn; £4.3bn), it was on an entirely different scale to the UK's £300m scheme.
The UK has spent far more as a proportion of GDP bailing out its banks - an estimated total of more than £1.5tn.
This is greater than not only France and Germany, but all the G20 countries, but then its financial system was arguably in a much deeper hole.
French and German consumers are not as burdened by debt as UK consumers
The Bank of England governor said this week that there were "encouraging signs" that the various measures were working, but he warned that the depth of the UK recession meant any stable recovery would take some time.
Is there a more fundamental problem in the UK?
Britain was more exposed when the downturn struck, and not just because of its reliance on the financial sector.
UK consumers are more in debt than those in much of mainland Europe.
It is a legacy of a pre-occupation with property ownership and the huge levels of credit, which supported the economy for so long.
It means that while Germany and France are seeing the return of some domestic demand, consumers in the UK will not be able to simply spend their way out of the recession.
So what happens now?
Economists point out that the growth in Germany and France is modest at best, and few would rule out the countries experiencing further quarters of negative growth.
Governments will not be able to prop up their economies for ever, so the stimulus programmes will have to end.
Unemployment is also continuing to rise, so if there is a recovery underway it is still a fragile one.
But if the French and German recoveries gather pace, that would be good news for the UK, because they remain some of its most important trading partners.
Nonetheless, the speed with which France and Germany have emerged from this recession is likely to reignite the debate about just how robust and flexible the UK economy has turned out to be.
BBC NEWS | Business | Why are France and Germany out of recession?
Successive British Governments have praised the ability of the British economy to respond when times get tough.
They have highlighted its flexibility in handling economic problems.
As a result, many people are wondering why Germany and France emerged from recession before the UK?
Is there a big difference between the economies?
Britain, along with the US, was right at the heart of crisis that led to the global downturn.
Our financial sector is much larger than those of our main EU rivals, so when the credit crunch struck, the impact was much more serious for the UK.
Germany and France have experienced problems in their banking sectors too, but unlike the UK, they have not had to intervene in the sector to the same extent.
There are other differences too.
Germany is the manufacturing heart of Europe. It relies upon exports to fuel growth. So its biggest problem has been the huge fall in global commerce, which the World Trade Organisation predicts will have contracted by 10% this year.
That fall led to a sharp contraction in German growth. In the first 3 months of the year, while Britain's economy shrank by 4.9% on an annualised basis, the contraction in Germany was 6.7%.
From the height of the boom to the depth of the recession, the fall in output in Germany was much greater than in the UK.
But as the global economy has started to recover, German firms have been cranking up production lines and rebuilding stock levels.
They have also been responding to a pick-up in domestic demand, all of which has contributed to growth.
Meanwhile, the financial sector generally is recovering too, but few expect it will ever return to the levels of activity seen prior to the credit crunch, so that will have a lasting impact in the UK.
So was all the money the UK government spent on stabilising the economy wasted?
According to the latest figures from the International Monetary Fund, the UK's discretionary fiscal measures, essentially the cut in VAT, accounted for around 1.6% of total UK economic output this year. It will fall to zero next year as the VAT cut will disappear.
Germany also provided 1.6% of GDP, but it will add a further 2% next year. The French measures are more modest, amounting to around 0.7% both years.
So the British economy may have enjoyed an early fiscal boost, but it was only on a par with Germany and, unlike France and Germany, that boost will not be continued into 2010.
France and Germany have also benefited from what economists call automatic stabilisers.
Their social security systems are more generous than the UK's and this has provided more support to consumers.
It is one of the reasons why they argued they did not need to follow the UK with headline-grabbing measures to stimulate the economy.
But one area of direct intervention does appear to have helped German growth.
Its car scrappage scheme has been credited with turning around the fortunes of its automotive sector. At 5bn euros ($7.1bn; £4.3bn), it was on an entirely different scale to the UK's £300m scheme.
The UK has spent far more as a proportion of GDP bailing out its banks - an estimated total of more than £1.5tn.
This is greater than not only France and Germany, but all the G20 countries, but then its financial system was arguably in a much deeper hole.
The Bank of England governor said this week that there were "encouraging signs" that the various measures were working, but he warned that the depth of the UK recession meant any stable recovery would take some time.
Is there a more fundamental problem in the UK?
Britain was more exposed when the downturn struck, and not just because of its reliance on the financial sector.
UK consumers are more in debt than those in much of mainland Europe.
It is a legacy of a pre-occupation with property ownership and the huge levels of credit, which supported the economy for so long.
It means that while Germany and France are seeing the return of some domestic demand, consumers in the UK will not be able to simply spend their way out of the recession.
So what happens now?
Economists point out that the growth in Germany and France is modest at best, and few would rule out the countries experiencing further quarters of negative growth.
Governments will not be able to prop up their economies for ever, so the stimulus programmes will have to end.
Unemployment is also continuing to rise, so if there is a recovery underway it is still a fragile one.
But if the French and German recoveries gather pace, that would be good news for the UK, because they remain some of its most important trading partners.
Nonetheless, the speed with which France and Germany have emerged from this recession is likely to reignite the debate about just how robust and flexible the UK economy has turned out to be.
