An interesting read over at Stratfor (behind the paywall) about the investigation launched into Germany’s trade surplus. A common refrain in looking at the problems of the Southern European countries is that a Germany which increases domestic demand and endures a bit of inflation will help the EU to survive. But, a few data points to consider:
-Since 2007, the German surplus has mainly been a function of increased exports to non-EU countries. So, while it may be true that the Germans have benefitted from the common currency and access to the EU and Eurozone markets, the sustainability of that surplus is not solely dependent on those factors.
-The other suggestion is that the Germans need to raise wages in order to encourage domestic demand, thereby helping the export sectors of other EU states. But, German wages are already 32% higher than the EU average (even though they have not grown as fast over the past 10 years) and a weaker currency probably only helps those countries from which Germany already has a high level of imports – and they are not really the countries that need the additional help right now (save for France).
All of which means, the only obvious manner to grow wages (as per some economic theory) is through more government spending. Which means the German taxpayer has to bail out the EU. Maybe the benefits outweigh the costs, but remember that the Germans have a deep understanding of what fiscal recklessness can lead to.
