The largest economy in Europe, Germany, is slowing down, and writer and analyst Marcel Pechman of Cointelegraph explains why this is good for cryptocurrencies.
The recession in Germany, the biggest economy in Europe, is discussed in the most recent edition of Macro Markets by Cointelegraph expert Marcel Pechman. The Wall Street Journal recently ran a headline that read, “Germany is dragging down Europe’s economy.” The article describes how the nation’s reliance on manufacturing has suffered as foreign governments scramble to defend domestic businesses.
Germany’s gross domestic product (GDP), which is 42% larger than France’s GDP, is ranked fourth globally, according to Pechman. Additionally, manufacturing accounts for around 20% of its economy. To make matters worse, only 10% of Germans work in the manufacturing sector.
Germany’s GDP is contracting as a result of the surplus (exports minus imports), which is at its lowest level in 23 years. This has an impact on the government’s ability to pay its expenses, such as pensions and public employees. Pechman then demonstrates how, in order to safeguard the manufacturing sector, the German government repeatedly intervened in the market.
Pechman reminds us that the euro only has a seven-year advantage over bitcoin and that the euro and the European Central Bank are at significant risk in the event that Germany eventually loses strength. Therefore, regardless of how the US dollar is performing, the euro offers a more immediate risk and could encourage the adoption of cryptocurrencies.
By increasing the interest rate repurchase maximum to 1%, Japan’s central bank has shifted its attention to the Asian market. Pechman asserts that despite the bank’s efforts to convince the markets that it is not raising interest rates, this is exactly what happened. The Japanese economy has been in decline for the past 20 years, and since 2010, the debt-to-GDP ratio has risen above 200%.
Japanese investors are large holders of US government bonds and own everything from Brazilian debt to European power plants, according to a Bloomberg story. The rest of the world is worried, according to Pechman, that Japan will have to sell its holdings in bonds, equities, and other assets, possibly resulting in a meltdown in those markets.
The view that the world’s economies are intricately linked is supported by the fact that the United States offered special liquidity agreements to Europe in order to assist it during the 2023 banking crisis. Regardless of the cause, according to Pechman, this system’s faith will eventually crumble. Even though it is impossible to forecast when those events will occur, positioning in Bitcoin makes sense in this situation.
