[nhaehnle]

We are actually largely in agreement. If you reread my comment that you replied to, you'll see that I was writing about the "real income / labor productivity" quotient.

The point is that the exchange rate with which countries adopted the Euro was more or less appropriate when it was set. Since then, the different development of the countries has changed the level of the exchange rate that would be appropriate if the countries still used different currencies.

So the question is: has the picture of corruption in Germany vs. Greece changed significantly in the last 10 years? Has the unit labor cost (which is real income / labor productivity) changed significantly between Germany and Greece?

Those are the questions you need to ask to understand where the differential is coming from.

[JanezStupar]

The Germans spent last decade reforming their pension system and labor market. They did it in the middle of economic boom. They urged everyone else in EU to do the same, especially the weaker economies.

They managed to secure a consensus and everyone (labor, capital and the state) is reaping the rewards.

In southern and eastern Europe, the unions an "leftist forces" managed to blow a hole in any attempt to reform pension and labor markets.

The key argument is that Germany giving in to these forces would mean a perpetuation of the root problem.

The way I see it this is a family issue, where father refuses to support one of his crack addicted kids, while the mother pleads "Please, you are breaking the family apart." Forgetting that there were previous confrontations in which she sided with the kid and didn't support the fathers demand that the kid goes on a rehab.

[nhaehnle]

The Germans spent last decade reforming their pension system and labor market.

Keep in mind that "reforming their pension system and labor market" is neoliberal code for "reducing the share of national income that goes towards workers and employees". So it is disingenuous to claim that labor is reaping the rewards these days. [1]

I mean sure, if you cut social safety nets and retirement systems, and pass the savings on to foreigners who are buying your export goods, then that will boost your exports. That doesn't make it good policy.

As for your metaphor, two can play that game.

Germany is more like the father who doesn't give a damn about the kid, thinks it's the kid's own damn fault - despite him regularly beating him/her (that's metaphor for Germany undercutting everybody else in the market, in case it's not clear), and is happy to see the kid end up unemployed, homeless, and with an abysmal life expectancy (all of these things are already literally reality or are starting to become so in Greece).

The rehab route would be to stop the insane domestic policies in Germany, install a bureaucracy that can do proper tax collections and fight corruption in Greece, and simultaneously stimulate the hell out of their economy.

Hey, nobody said rehab is easy - it requires both discipline and compassion.

[1] In terms of real income this is obvious from even a very cursory glance at the data. In terms of unemployment, the picture is admittedly not quite so obvious. Unemployment rates are lower than in the southern countries, but even the official numbers are still very high by any reasonable standard. It gets worse when you consider marginal work (part time etc.).