If you want to understand the German (and the Euro area) economy key trend, here are three charts:
Source for all: http://www.pewsocialtrends.org/2015/05/21/family-support-in-graying-societies/#
Combined, these imply one thing and one thing only: Domestic Demand (Investment + Consumption + Government Spending) can be sustained [in theory] over the next decades by just one thing: "Government Spending". In practice, the bad news is: such spending is neither hugely productive, nor feasible in current levels of indebtedness worldwide. Worse [from economic perspective] news: much of this spending will be swallowed by health & end-of-life services that will not be increasing the productive capacity of our societies.
In the mean time, logic of the above two charts implies:
- Increased build up of external imbalances (current account surpluses in more extremely ageing countries);
- Increased savings not suitable (due to risk profiles) for private investment (hence higher retail & long-term demand for highly rated bonds and equity, as opposed to higher growth bonds and equity);
- Reduced domestic consumption;
- Heating up tax competition on the side of capturing revenues (as opposed to incentivising higher growth);
- Growing reliance on 'hidden' taxes (e.g. currency devaluations and indirect taxation) to amplify (1) and (4);
- Current 'peak productivity' generation (chart 3 above) is screwed on the double, and productivity growth curve going forward is downward-sloping, most likely even if we control for technological innovation.
All six points currently are at play. Draw your own conclusions.