[TheOtherHobbes]

Well, no. The fundamental problem is that Germany has been treating the rest of the EU as an expedient export market while refusing to allow equivalent imports, and at the same time aggressively insisting that countries in the EU should somehow magically not need debt... to continue buying from Germany.

There's also the minor point that this is yet another excuse to indulge the usual neoliberal hatred of social spending and everything else that improves the condition of ordinary people who work for a living.

Germany has a long post-war history of renegotiating or ignoring debt. So crashing the Greek economy by enforcing murderous austerity - literally murderous in its effects, and not hyperbole - is a new peak in self-serving hypocrisy.

[jahewson]

Your statement about Germnay refusing to allow imports is manifestly false. The EU is a free trade area and its member states are not permitted to engage in such activities. The EU has its own courts to enforce such rules.

It's certainly true that Germany is a net exporter: this is because of their ability and competitiveness in engineering and technology, combined with the fact that Germans are not big consumers and prefer to save their money. It would be good for Europe as a whole if Germans spent more money on imports - but the idea that they are deliberately blocking imports is bogus.

Europe doesn't really have neoliberals, so I'm not sure what your point is there. If anything, Europe leans to the left.

If you want to find a country with a long history of ignoring debt, then look no further than Greece, which has defaulted over 20 times. It is a country in deep need of structural reforms in order to have a viable economy. Yet the reforms haven't happened, due to corruption, cronyism and general foot-dragging. This is the real problem and debt-reduction isn't going to solve it.

[yxhuvud]

No, Germans are not more frugal than other people. The main issue behind lacklustre German consumption is that neither their wages nor their investment in infrastructure has kept pace with their productivity growth.

[rwissmann]

15-20 years ago Germany was the sick man of Europe. Labour market reforms in line with an industrialization boom in Asia restored the competitiveness of her industrial economy.

The real problem with this argument is that they are too short-sighted. Germany cannot artificially reduce its competitiveness to appease other EU countries, because competition happens on a global stage and so the EU would simply lose out further to North America and Asia.

Your are correct that Germany should spend more on infrastructure.

[seizethecheese]

What's your source, your intuition? Germany is one of the highest savers in the Euro area; much higher than Greece.

http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS

[antman]

This table does not mention personal savings. It is cannot provide insight, is as useless as GPD per capita.

[yxhuvud]

That Germany, the state, is living beneath its means does not say anything at all about the German people or if they save their wages or not.

[bildung]

If I understood GP right you both say the same: Being frugal means consuming less (= saving instead).

[jahewson]

Wages and infrastructure are key factors, but they're not the complete story. Other countries have lower wages, yet import more per-capita.

[galfarragem]

Completely agree. Just compare Athens or Lisbon subway with Berlin subway. It seems that Germany is the most poor of these countries.

[tspareme]

The issue here is that we know Greece is not as competitive in exports as Germany. So what can Greece do to run a trade surplus while in a common currency union with Germany? They are not able to depreciate their currency. They are not allowed to put up tariffs either. Also, where does the German do with their export surplus. They don't just hide it under the mattress. German banks is also looking for a outlet, however, Greece is not allowed to implement capital control to block the inflow. So the only alternative is to out compete Germany or some other Euro-zone countries (but this just substitute Greece for some other PIGS).

The key here is that for everyone in the world, the trade surplus and deficit must sum to zero. So someone has to run a trade deficit if German/Japan/China wants to run a trade surplus. German now wants the entire eurozone to run a trade surplus which means someone else must run a even bigger trade deficit.

BTW, it is in theory possible for Greece to run a government budget surplus but a trade deficit. This would mean that the private sector is loading up on the debt. Even in this case, the private sector is really the banks which has to be backstopped by the government anyway. So bank debt is just another form of government debt.

[jahewson]

Yes, that is the core issue: can the Euro sustain both Germany and Greece given how diverse their economies are? I have my doubts, but perhaps what we're seeing is an emerging solution wherein Germany subsidises the weaker members of the Euro indefinitely. That still doesn't absolve Greece of financial responsibility but it would support their position of having a sizeable portion of their debts written off. It's a sort of sovereign welfare state...

[x0x0]

Europe doesn't have neoliberals? How else do you explain post 1990 economic policy?

TheOtherHobbes isn't discussing rules or laws, but merely the current and recent economic structure. Germany net exports. Therefore, without floating currencies, only one thing may occur: someone must borrow money. You write about this -- "a country with a long history of ignoring debt" -- as if it were a moral claim, rather than an accounting identity.

Where Greece not in a currency union, they could have gradually restructured, as drachmas depreciated against foreign currency, or they were forced to borrow in a foreign currency. Their problem is that the EU is set up, by design, to actively fuck less productive southern states. States, whether states in a union or independent states, either need their own currency in order to accommodate differing productivity levels, or high productivity net exporters must accept permanent subsidization (as northern / coastal states do for the American south) of less productive states.

The simple fact of the matter is that the ECB has long acted in a way that favors Germany while the German government has carefully avoided explaining to Germany the consequences of running an export economy inside a currency union. Now that they have had 20+ years of economic success as the outcome of the union, they wish to duck the consequences.

[jacquesm]

> while refusing to allow equivalent imports

That very much is in citation needed territory, please give at least one example of how Germany is refusing intra-European imports in any category. Free trade is one of the cornerstones of the EU, Germany imposing a tariff or blockading goods produced elsewhere in Europe would make some pretty fat headlines.

[bildung]

> > while refusing to allow equivalent imports

> That very much is in citation needed territory, please give at least one example of how Germany is refusing intra-European imports in any category.

(Not GP.) You are of course right that Germany has not created import tariffs or other direct and illegal options. OTOH the German government has implemented numerous actions that indirectly had wage-suppressing effects (which per definition lowers imports and raises exports) in the last decade - to a degree that even the IMF(!) felt the urge to demanded actions for more domestic demand on multiple occasions [1][2].

The one notable exception is the implementation of a minimum wage law in 2015.

[1] 2012: http://bigstory.ap.org/article/imf-urges-germany-spur-domest... [2] 2014: http://www.bloomberg.com/news/articles/2014-05-19/imf-urges-...

edit: here's a graph comparing income-adjusted wage development of the developed countries: http://nrt.revues.org/docannexe/image/1382/img-2.jpg

[rwissmann]

Germany had anemic economic growth about 15-20 years ago. After hard political fighting these sort of reforms were enacted.

Competition is global. Greece is not just not competitive with Germany, but also with China, the US, Japan, Australia, ... . That is the real problem.

[jahewson]

Except that Greece isn't in a currency union with those other countries. If Greece had their own weak currency then it would make their exports cheaper, which might make them better off (except that leaving the Euro would trigger a financial collapse). China has been trying to keep the Yen cheap against the dollar for this reason, if your goods are cheap then ohers will buy more of them or prefer you over another producer.

[rrggrr]

Refusing isn't the right word. From my experience there are fewer categories of products where a German consumers gets value add from purchasing non-German products (B2C or B2B) as compared to, say, Greece. First how much could Germany import from Greece at the outset. And, not specific to Greece, there is a general aversion to buying the lowest cost product just to save money; and there is a general preference for predictability, longevity and quality. Others may have the opposite experience, but for me German demand for domestically made products is a sensible and a cultural "refusal" and not an institutional one.

[nhaehnle]

TheOtherHobbes used a bit of an ellipsis here. There is no outright refusal of imports by law, but there is a refusal to allow the kind of economic conditions (such as wage increases in line with productivity increases) that would lead to a balance of imports and exports.

As for citations, a recent comparison of the relevant metric, the relative unit labor cost: http://krugman.blogs.nytimes.com/2015/01/29/i-do-not-think-t...

It is evident that of all Eurozone states, Germany is the one that deviates the most from a policy of stability. Unfortunately, the deviation is in a direction that ends up with Germany in a position of power.

[mafribe]

Germany deviates from the European norm by having products on offer that are globally competitive. What a crime. Let's make Europe more stable by turning every country into Greece!

[nhaehnle]

Competitiveness is a matter not just of value, but also of price, which is largely a matter of how much you pay your employees. Germany achieves its competitiveness by paying employees badly. That is a not a virtue, it's a vice.

That's the key here, and again I encourage you to read and contemplate the post that I linked to, since it clarifies the issue.

[mafribe]

Krugman's article like everything he writes is not insightful. Wages are no per-se too high or too low, but rather relative to wage levels of competitors and desirability of produced goods. Germany competes in a global market and in that global market Germany is a high-wage country. When it had higher averages wages, Germany lost its competitive edge.

Here are more interesting questions: which are the average wages paid in Greece appropriate for the product Greece seeks to sell? Which products from Greece do you buy on a regular basis? Greek smartphones? Greek cars? Greek chemical products?

[nhaehnle]

Please, actually read the article. The numbers in the last diagram are relative unit labor costs. In other words, they are labor costs divided by the (market) value of the produced goods. This division incorporates everything you claim to be missing, which is why I feel confident in the claim that you either haven't read or haven't understood the article.

[bibabo]

"[...] literally murderous [...]"

Exactly. This needs to stop immediatly. Suicide rates in Germany are 4X (!) as high as in Greece. Germany is living on an extreme austerity program since more than 10 years - the Agenda 2010 implemented by the socialists in 2003. Cuts to unemployed people, cuts to families, cuts to everyone, stagnation of income for over a decade except for the top 1%. Where do they think this should end?

( http://en.wikipedia.org/wiki/List_of_countries_by_suicide_ra... )

[bibabo]

Germany is importing work (which is not measured in the usual import/export KPIs) on massive scale with money going back to the originating countries. This has been going on with Italy and Turkey over decades (60-80), with Poland in the 90s and currently with Spain and Eastern European countries.

Real import/export KPIs would take this into account. Then I would assume Germany is a net importer not exporter.

[Onoshobi]

I spent a year living in Greece, and the impression that I got was similar to what you are saying.

Greeks felt abandoned by the Eurozone -- they expected a 2 way street, and felt cut loose when they needed a hand.

[happyscrappy]

Greece and Germany both profit from a Grexit, it is middle tier countries that will suffer with the demise of the EU.