This week, the European Commission announced an investigation into Germany’s current account surplus and its effects on the EU economy. The announcement came two weeks after a US Treasury report accused the country’s economic policy of hampering the eurozone recovery and hurting global growth.
The implication here is that the economic powerhouse of Europe is not contributing its “fair share” to the economy of the European Union as a whole. Its consistent surpluses, the (il)logic goes, point to a lack of domestic demand and a heavy reliance on exports. In other words, if only those darn Germans stopped saving their euros and started spending them we would all be better off!
Come on you greedy Germans, forget about your own competitiveness! Stop being so self-centered and share some of the wealth, will you? Consider those poor unemployed people in Spain, Greece, Italy and Portugal; wouldn’t you help them if you could? Well, you can! Just stop being so stingy and start spending, and make it fast!
The criticism heard on both sides of the pond is akin to a teacher blaming her A-students for the poor performance of the other kids. Now the teacher has even gone so far as to advocate that the bar be lowered to make everyone feel better. “If only they spent a little time helping out the dumb kids everyone could have a C. Things would be so much fairer if it wasn’t for the selfishness of the A-students, and nobody’s feelings would get hurt!”
Lest you misunderstand the above, I am not actually unhappy with the EU’s latest display of totalitarian insanity. In fact, I believe that every liberty-loving soul in Europe and elsewhere has reason to be grateful for the never ending madness emanating from Brussels. After all, who but power-hungry control freaks would benefit from the belief that centralizing power into the hands of a relative handful is actually a good idea?
Circling back to the topic, though, it should be noted that there are no import barriers keeping foreign goods out – except those goods coming from outside of Fortress Europe as regulated by the EU –, nor is there any exchange rate manipulation. As such there is no reasonable justification for the surplus hype.
In fact one might be surprised to find out that German private consumption growth has actually been the second highest in the eurozone, after Luxembourg. And while it is true that corporate investment in the “Bundesrepublik” has been sluggish, in today’s global economy a rising German tide lifts all global boats. Consumers all over the world apparently are perfectly content buying German goods, or they would not be buying them.
Clearly those goods that are in high demand abroad are considered the best bang for one’s buck and thus preferred over the same (or similar) products sourced from other countries. Besides, many non-German businesses benefit from this, too, by supplying the highly competitive manufacturers with the parts or services they need in the production process. But perhaps it is unrealistic to expect members of the EU apparatchik to figure that out.