July 04, 2016
The Washington Post had a piece assessing the power relationships in the European Union after the departure of the United Kingdom. The piece discusses whether Germany will play an even more important role. When it turns to potential rivals the piece tells readers:
“France is mired in economic woes and a war on terrorism. Spain and Italy face massive unemployment and political instability.”
It would have been worth pointing out that the reason France is mired in economic woes and that Spain and Italy face massive unemployment and political instability is the austerity policies demanded by the Germans. As a result of these policies, countries are being forced to constrain their budget deficits even as long-term interest rates are near or below zero and inflation is under 1.0 percent.
According to a new study from the European Central Bank, the euro zone’s economy is 6.0 percent below its potential level of output. With Germany near or at its potential level of output this means that the output gap in other countries is considerably larger. In discussion of the roles of various countries in the EU it would have been appropriate to point out how the economic policies demanded by Germany have undermined its rivals.
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