Today German economy relies more on exporting to the rest of the world and less on the homegrown demand
Southern countries such as Italy or Spain are struggling to increase exports, obtaining a surplus that allows them to cancel debts. Every decrease in the trade deficits of those countries has to be matched by a decrease in someone else’s trade surplus. And it doesn’t look like Germany is getting it as their current account balance had a 5.7 surplus in 2011 and it is expected to end around 5.8 in 2013. The country it is not affected by a continuous rise of the currency. In fact if the country still had its own currency, it will be soaring, diminishing exports.
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Adam Posen of Washington’s Peterson Institute for International Economics affirms that “Germany sees export success as a goal in itself rather than a means to an end”.
The fact is that this economic policy , threatens the viability of the recovery in the South of Europe, hence Spain or Portugal will not be able to pay back the loans that Germany’s savers, banks and institutions have made to them
Shouldn’t Germany increase its focus in the local economy, increase government spending and less in increasing its trade surplus? German households will again benefit in 2013 from a higher disposable income, due to wage rises and a rather accommodative fiscal policy. It is unlikely they will turn to American-style consumers but this spending power should be spent in the local economy