Germany and its Excusiato Non Petita

Germans deny being guilty for the current situation of the euro zone’s countries. These are far from subtle German sophistries, which clearly demonstrate that the German economic model is not good but quite clumsy.

The bad news is that they have been able to sell their model to the other countries, which eagerly bought it. That’s why we have to grin and bear it. Wolfgang Münchau does not bear it though. He does not agree with the German policies –and he is German.

Such policies are quite simple and easy: whatever that benefits Germany is good and must be praised, while strongly deny that it have negative effects on other countries.

Every country has the right to develop technologically as it pleases. But it doesn’t justify Germany’s continual external surplus, whose root is in the excess in forced savings due to monetary motives. Exports may increase a lot, but if the expenditure in the rest of the world grows at the same pace as usual, there wouldn’t be accumulated external surplus.

What is the trick then? The trick is that, before, Germany had its own currency and it tended to be the strongest in the world, which slowed down the external superavit to a reasonable level. The following chart shows that Germany never had a surplus/GDP as high as now:


Now, the euro is too strong for countries such as Spain but too weak for Germany, which takes advantage of this situation. And they don’t care that their benefits come at the expense of the Southern countries in the EU.

The euro is a system of fixed exchange rates that requires loyalty to the “rules of the game.” However, Germany prevents the expansion of the money within its country (and also within the rest of the euro zone) by controlling the ECB. Thus, the central bank doesn’t have the minimal amount of money necessary for the area. If it did, all the money would go to Germans, who would spend more thus accelerating the recovery of the other European countries.

When the euro was introduced, the proper adjustment mechanism was not taken into consideration; on the contrary, it was deleted all reference to it -despite the warnings from many Anglo-Saxon economists.

The thing is, there actually exists an alternative policy that has not been undertaken because Germany does not want to. And now the whole euro zone is entering a new period of deflation.

Germany deflation


About the Author

Miguel Navascués
Miguel Navascués has worked as an economist at the Bank of Spain for 30 years, and focuses on international and monetary economics. He blogs in Spanish at: http://

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