German economic growth depends on a weak euro

GERMAN exporters, under pressure as a result of a slowdown in several key trading partners, must be hoping the renminbi's expected incorporation into the IMF's special drawing rights leads to a firmer Chinese currency. The rise in the renminbi against the euro - up 76 per cent over the past seven years - has greatly helped German companies' Asian competitiveness, a significant reason for Germany's hitherto booming China-bound exports.

This in turn has helped power the country's overall positive economic performance since the financial crisis. A reversal in the wake of China's economic slowdown would damage Europe's largest economy. Conversely, a further shift towards monetary easing and an extension of quantitative easing by the European Central Bank, widely expected for Dec 3, would send the euro lower - a further boost for Germany's export-led economy.

The renminbi's decline in August, after China's exchange rate liberalisation moves, was one of the factors weakening the German economy, which grew only 0.3 per cent in the third quarter, less than expected, in line with the generally lacklustre performance of the euro area. In coming months, the scandal surrounding the falsification of diesel emission data at Volkswagen may further impair the "made in Germany" label - a further drag on the German economy.