German economic success story?

Other developed countries are finding it hard to match Germany's economic performance. In a volatile business environment, the German economy expanded by 1.7 percent last year. And that's not only because products and services "Made in Germany" continue to be highly sought-after around the globe. It's also because Germany's private households and the state have both been increasing consumption, albeit for different reasons.

The number of people with a job hasn't been higher in 25 years. Saving money doesn't make that much sense anymore because of record-low interest rates, so people's spending has been on the increase. The federal state hasn't been a big saver either, shelling out huge sums to accommodate hundreds of thousands of refugees. The refugee line-item in the state's budget is likely to further increase this year, meaning that consumption will remain a major driver of growth.

The man with the balanced budget

Meanwhile, German Finance Minister Wolfgang Schäuble has reported a budget surplus of over 12 billion euros ($17.7 billion) for 2015. Hats off to him, although his love for balanced budgets hasn't really made him many friends. If you add in the balance sheets of Germany's regional states and communities, the 2015 budget surplus amounts to no less than 16.4 billion euros.

Of course, the conditions for Schäuble to achieve his goal have been propitious. There's record-high employment in Europe's economic powerhouse, resulting in booming tax revenue and lower welfare outlays. Moreover, the interest rates on German government bonds are hovering at the zero mark - the minister practically doesn't have to pay any interest on federal debt at present. And then there's the low oil price, leaving billions more in the pockets of consumers - money they can spend on shopping sprees instead of sending it away to petro-states.

Think again ...

And that's the snag on all this good news. The German government can only to a very limited extent be credited with this moment's wonderful economic figures. The oil price is down because of the Saudis, while ECB chief Mario Draghi is responsible for keeping interest rates and the euro exchange rate down. This combination is a strong drug for the German economy.

But companies' willingness to invest more is constrained amid the volatile business environment in most parts of the world. German machine tool firms are a prime exhibit for this, with their investments stagnant last year.

What's also missing is a huge investment program to modernize the nation's infrastructure. OK, there are a couple of billions allocated to faster Internet connection, and a bit of funding for some new bridges. But there's no really sustainable concept in sight.

The finance minister says that the whole budget surplus will be set aside to cope with the ongoing influx of refugees. That's sending out the wrong signal to citizens, who've started to question Chancellor Angela Merkel's "We can do it" mantra around the massive refugee influx.

Germany needs to cope with both challenges - it must invest in its future and integrate refugees.

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