Wren-Lewis, S. (2014) “Why the Eurozone suffers from a Germany problem“, Mainly Macro Blog, 26 Οκτωβρίου.
When, almost a year ago, Paul Krugman wrote six posts within three days laying into the stance of Germany on the Eurozone’s macroeconomic problems, even I thought that maybe this was a bit too strong, although there was nothing in what he wrote that I disagreed with. Yet as Germany’s stance proved unyielding in the face of the Eurozone’s continued woes, I found myself a couple of months ago doing much the same thing (1, 2, 3, 4, 5, 6), although at a slightly more leisurely pace. Now it seems the whole world (apart from Germany, or course) is at it: here is a particularly clear example from Matt O’Brien.
I’m not going to review the macroeconomics here. I’m going to take it as read that
1) ECB monetary policy has been far too timid since the Great Recession began, in part because of the influence of its German members.
2) This combined with austerity led to the second Eurozone recession, and austerity continues to be a drag on demand. The leading proponent of that austerity is Germany.
3) Pretty well everyone outside Germany agrees that a Eurozone fiscal stimulus in the form of additional public investment, together with Quantitative Easing (QE) in the form of government debt purchases by the ECB, are required to help quickly end this second recession (see, for example, Guntram Wolff), and the main obstacle to both is the German government.
The question I want to raise is why Germany appears so successful in blocking or delaying these measures. At first the answer seems obvious: Germany is the dominant economy in the Eurozone. However that is too easy an explanation: while Germany’s GDP is less than a third of the Eurozone total, the combination of French, Italian and Spanish GDP is nearly one half. Now it could be that in the past France, Italy and Spain have failed to coordinate sufficiently to oppose Germany, in part because France has placed a high value on the French-German bilateral relationship. But that seems less of a problem today.
Σχετικές αναρτήσεις:
- Mitchell, B. (2014) “The German experiment has failed“, Mainly Macro Blog, 07 Οκτωβρίου.
- The European Magazine: Conversations, Interview with Philippe Legrain, “Germany is undermining future growth”, 20 Σεπτεμβρίου 2014.
- Daveri, F. (2014) “The German surplus and the Eurosceptics“, VoxEU Organisation, 28 Μαΐου.