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Unfortunately the macroeconomic aspect is a total taboo in Germany. Even "solidary" leftists claim we profit so much from the Euro... The ones on the very left

Unfortunately the macroeconomic aspect is a total taboo in Germany. Even "solidary" leftists claim we profit so much from the Euro... The ones on the very left get it, but they barely talk about it. Germany will never give up on the cheated export surplus until the whole thing goes bust. Hell, barely anyone gets it anyway. Germany is certainly not alone to blame. How can the competitiveness of Germany increase for more than a decade without any other EU country caring? In the past they devalued their currencies, so why didn't they act now? Also Germany violates the 6% export surplus limit, no one cares!

repolfx 8y ago
Germany (and France!) violating the same budget rules it insists everyone else follows is indeed a damning indictment of what the EU truly is. But Germany isn't a winner from the Eurozone. I don't understand why everyone keeps thinking that. Germans are suffering under it and allow themselves to suffer because they see unifying Europe as a form of penance for World War 2. Think about it - German "competitiveness" is just another way to say that they work harder than everyone else. They save money that the ECB then gives to foreign governments through QE. They make things and send them to other parts of Europe. In return they get what are effectively IOUs from the other countries - TARGET2 balances that are supposed to imply a transfer of "real" euros (i.e. paper money) one day, but which are so huge those transfers will never actually happen. There are no realistic scenarios in which an equally sized flow of goods or services ever comes back to the poor Germans in return for their efforts: the only plausible outcome is that either the internal imbalances are written off for good by the EU authorities, or that other countries exit the Eurozone and the imbalances are written off amidst acrimony and bitterness. I cannot see any realistic path to Italy, Spain, Portugal, Greece, eastern Europe etc ever becoming as productive as the Germans are, let alone more productive as would be required to restore balance to the system, if only because the Germans never seem to give themselves pay rises. In the end Germany will be the biggest loser of the EU project, simply because they put the most into it to start with.
- Phil_Latio 8y ago
  > But Germany isn't a winner from the Eurozone Well our politicians see it different. Germany was able to have government surpluses and decrease the countries debt. We have low unemployment. Relative to other EU countries, especially France, we look pretty healthy. Despite the domestic market being a mess and the average worker being stripped of normal wage increases, it's hard to argument against these "successes" without explaining in detail the macroeconomic aspects and the consequences in the long run. > German "competitiveness" is just another way to say that they work harder than everyone else. Actually France has about the same productivity as Germany, always had since introduction of the Euro. I think what you mean is productivity in relation to wages, namely unit labor cost. Meaning germans get way too low wages for their productivity. And yes Germany will be the biggest loser: The government and export industry gained the most, they will lose the most. Millions of additional unemployed people, hatred from the other (former) Euro countries, far right/left parties may have a shot of getting to power, etc..
  - repolfx 8y ago
    Yes, but the UK is outside the eurozone. It also has very low unemployment and although the deficit exploded under a left wing government and due to the financial crisis, it's been falling since 2010 and is now at its lowest level in a very long time. There's still more work to do to reach surpluses (last achieved in 2000) but the UK wasn't a part of the eurozone then either. And of course Switzerland also doesn't use the euro and has a balanced budget, and a strong economy. So to me the domestic German narrative that these sorts of economic success are to do with the eurozone seem wrong. Countries in Europe and which are not using the Euro have been able to obtain these results too. Probably if the euro had never happened Germany would be doing just as well today, and their purchasing power would have effectively gone up even if the wages hadn't because imports would have become so much cheaper. Good point about productivity vs unit labor cost. That's indeed what I meant.
    - Phil_Latio 8y ago
      What you have to know or realize: ALL finacial sectors in Germany are net savers. Private households, companies and now also the government. When there are savings, someone else has to have debt. It's a zero sum game, meaning all savings have a debt counterpart. Now where is the debt counterpart for Germany? Look at this picture: http://www.flassbeck-economics.com/wp-content/uploads/2016/04/Deflation-3.png http://www.flassbeck-economics.com/wp-content/uploads/2016/0... On top, private households. Below, companies. Below that, the government. And finally, THE REST OF THE WORLD. As you can see, from the start of the Euro, the debter position in Germany shifted from being the government or the companies, to foreign countries. Every year Germany needs 280€ billion or so new debt IN OTHER COUNTRIES to have these savings. Other eurozone countries continuously lose market share against Germany: https://upload.wikimedia.org/wikipedia/commons/0/03/Balance_of_trade_in_goods_and_services_%28Eurozone_countries%29.gif https://upload.wikimedia.org/wikipedia/commons/0/03/Balance_... But it affects non-eurozone countries as well of course. For example the US basically critized Germany (long before Trump) as a currency manipulator, Trump just speaks it out loud. Because again, without the Euro, Germanys own currency would value up and the massive exports would be impossible. So I think you can't deny that some dramatic change happend when the Euro was introduced and that it's still happening today. Now if you assume Germany did not do wage dumping and the Euro wasn't introduced, could Germany be in the same position as it is now? No. Look at the graphic again and pin the red line (foreign countries) to the zero position. That in turn means, you now have to pull another line down! Because remember, all lines have to sum up to zero. Which line would you pull down? Ask private households to stop saving and spend much more money? Or increase company tax (while every other country is decreasing it)? The only solution left would be for the government to make deficits. Currently, other countries make deficits for Germany. This is not sustainable.

repolfx 8y ago

Germany (and France!) violating the same budget rules it insists everyone else follows is indeed a damning indictment of what the EU truly is. But Germany isn't a winner from the Eurozone. I don't understand why everyone keeps thinking that. Germans are suffering under it and allow themselves to suffer because they see unifying Europe as a form of penance for World War 2. Think about it - German "competitiveness" is just another way to say that they work harder than everyone else. They save money that the ECB then gives to foreign governments through QE. They make things and send them to other parts of Europe. In return they get what are effectively IOUs from the other countries - TARGET2 balances that are supposed to imply a transfer of "real" euros (i.e. paper money) one day, but which are so huge those transfers will never actually happen. There are no realistic scenarios in which an equally sized flow of goods or services ever comes back to the poor Germans in return for their efforts: the only plausible outcome is that either the internal imbalances are written off for good by the EU authorities, or that other countries exit the Eurozone and the imbalances are written off amidst acrimony and bitterness. I cannot see any realistic path to Italy, Spain, Portugal, Greece, eastern Europe etc ever becoming as productive as the Germans are, let alone more productive as would be required to restore balance to the system, if only because the Germans never seem to give themselves pay rises. In the end Germany will be the biggest loser of the EU project, simply because they put the most into it to start with.

Phil_Latio 8y ago
> But Germany isn't a winner from the Eurozone Well our politicians see it different. Germany was able to have government surpluses and decrease the countries debt. We have low unemployment. Relative to other EU countries, especially France, we look pretty healthy. Despite the domestic market being a mess and the average worker being stripped of normal wage increases, it's hard to argument against these "successes" without explaining in detail the macroeconomic aspects and the consequences in the long run. > German "competitiveness" is just another way to say that they work harder than everyone else. Actually France has about the same productivity as Germany, always had since introduction of the Euro. I think what you mean is productivity in relation to wages, namely unit labor cost. Meaning germans get way too low wages for their productivity. And yes Germany will be the biggest loser: The government and export industry gained the most, they will lose the most. Millions of additional unemployed people, hatred from the other (former) Euro countries, far right/left parties may have a shot of getting to power, etc..
- repolfx 8y ago
  Yes, but the UK is outside the eurozone. It also has very low unemployment and although the deficit exploded under a left wing government and due to the financial crisis, it's been falling since 2010 and is now at its lowest level in a very long time. There's still more work to do to reach surpluses (last achieved in 2000) but the UK wasn't a part of the eurozone then either. And of course Switzerland also doesn't use the euro and has a balanced budget, and a strong economy. So to me the domestic German narrative that these sorts of economic success are to do with the eurozone seem wrong. Countries in Europe and which are not using the Euro have been able to obtain these results too. Probably if the euro had never happened Germany would be doing just as well today, and their purchasing power would have effectively gone up even if the wages hadn't because imports would have become so much cheaper. Good point about productivity vs unit labor cost. That's indeed what I meant.
  - Phil_Latio 8y ago
    What you have to know or realize: ALL finacial sectors in Germany are net savers. Private households, companies and now also the government. When there are savings, someone else has to have debt. It's a zero sum game, meaning all savings have a debt counterpart. Now where is the debt counterpart for Germany? Look at this picture: http://www.flassbeck-economics.com/wp-content/uploads/2016/04/Deflation-3.png http://www.flassbeck-economics.com/wp-content/uploads/2016/0... On top, private households. Below, companies. Below that, the government. And finally, THE REST OF THE WORLD. As you can see, from the start of the Euro, the debter position in Germany shifted from being the government or the companies, to foreign countries. Every year Germany needs 280€ billion or so new debt IN OTHER COUNTRIES to have these savings. Other eurozone countries continuously lose market share against Germany: https://upload.wikimedia.org/wikipedia/commons/0/03/Balance_of_trade_in_goods_and_services_%28Eurozone_countries%29.gif https://upload.wikimedia.org/wikipedia/commons/0/03/Balance_... But it affects non-eurozone countries as well of course. For example the US basically critized Germany (long before Trump) as a currency manipulator, Trump just speaks it out loud. Because again, without the Euro, Germanys own currency would value up and the massive exports would be impossible. So I think you can't deny that some dramatic change happend when the Euro was introduced and that it's still happening today. Now if you assume Germany did not do wage dumping and the Euro wasn't introduced, could Germany be in the same position as it is now? No. Look at the graphic again and pin the red line (foreign countries) to the zero position. That in turn means, you now have to pull another line down! Because remember, all lines have to sum up to zero. Which line would you pull down? Ask private households to stop saving and spend much more money? Or increase company tax (while every other country is decreasing it)? The only solution left would be for the government to make deficits. Currently, other countries make deficits for Germany. This is not sustainable.