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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 financi

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.

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.