To Save the EU Germany might have to Change

I get into a lot of arguments about Germany's current account surplus which this year is around 8.6% of GDP. That is a huge number. It has drawn criticism from primarily the US claiming currency manipulation. It has also come under attack because of the German propensity to save. Lastly, the other old chestnut rolled out is Germany's ruthless efficiency (in manufacturing).

Germany carries an almost hysterical fear of inflation predicated on its experience of hyper-inflation in the 1920's. This has resulted in a national consciousness which focuses on financial stability with a strong tendency to save on a private as well as on a public level.

But Germany's current account surplus is only partially a result of trade. It doesn't subsidize its exports and only indirectly controls the level of the Euro by virtue of its economic might. Under the current structure the independence of the European Central Bank (ECB) remains as sacred as that of the Bundesbank with the caveat that politically there is monetary but not fiscal union which means Germany, like every other EU nation looks to its own house first.

Because there is no overt currency manipulation nor are there any subsidies paid to support exports the problem appears to boil down to excess savings at the expense of investment.

The Financial Times(FT) recently attacked the Germans suggesting that Germany should tackle its saving surpluses which they went on to blame on over-regulated service industries; low growth level of public and private sector investment; and damaging and unnecessary fiscal surpluses.

Hmm.

Damaging and unnecessary fiscal surpluses.

Just what is it that they would like Germany to do?

I believe they are referring to calls from some corners for a fiscal union, or at least the first steps to a fiscal union giving the EU/ECB the right to impose policies on member states to influence the relationship between savings and investments. But this would be a major step to a federal Europe. It requires relinquishing aspects of sovereignty that no one seems to be willing to do because they think Germany will run a federal Europe.

Sounds like a rock and a hard place.

What it really requires is a German politician- either Merkel or Schulz to admit domestically that although Europe has benefited from the EU and Euro, Germany has benefited even more. It might be time to spread some of the German benefit (ie surplus), and to do so will require more rather than less union.

The argument somehow always ends with someone yelling at me that the Germans run Europe.

I don't argue. I refer to their complaints about Germany's ruthless efficiency.

I ask would they prefer they were building tanks instead of cars.....