The improvement in profitability in industry had beneficial effects on the banking system, which is currently engaged in securitizing large volumes of doubtful loans. Symptoms of deflation are still present. Monetary policy has been even more expansionary. With the lessening of global political tensions, economic activity has picked up and progressively gained strength in the emerging economies as well.
According to our economic models, GDP in Germany would decline by ¾% and employment would decline by 1% while the effect on the deficit countries would be close to zero. This sobering result is mainly due to the structure of trade flows between Germany and Southern Europe.