November 13, 2013
That is what readers of a NYT piece on criticisms of German government policies from the European Union and the German Council of Economic Experts, a panel of economists that advises the government might conclude. Unfortunately the piece did not make clear that the criticisms were coming from opposite directions.
The European Union is criticizing Germany for refusing to take measures that would help to correct its huge trade surplus with other euro zone countries. The list of policies that would help bring about this adjustment would include stimulatory fiscal policy (i.e. larger deficits) and policies that would lead to higher German wages, such as a national minimum wage and measures that would increase the bargaining power of unions.
By contrast, the Council of Economic Experts was critical of measures that would raise wages. It wants Germans to suffer in the same way as other Europeans.
As a practical matter, if Germany does not take steps to raise the price of its goods relative to prices in other euro zone countries then it will continue to run large surpluses with those countries. It is likely that many of the loans needed to allow countries like Greece to pay for its imports will have to be written down in the future as has been the case in the past.
Apparently Germans prefer to give away their goods rather than sell them. That is a strange economic view, but it seems to be the preferred approach in Germany. It would have been helpful if the piece had made this point more clearly.
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