امروز : 11 ارديبهشت 1396

World Disbalance

چهارشنبه 27 بهمن 11:24
French Finance Minister Michel Sapin has called on Germany to invest more of its export surplus to help growth in the Eurozone; another solution to the disparity between Germany and the rest of the Eurozone would be to force Berlin out of the single currency
World Disbalance

According to Rapporteur Report From, Sputnik, LinkOn Monday, French Finance Minister Michel Sapin told the German newspaper Handelsblatt that in order to increase growth in the Eurozone, countries such as Germany need to increase investment.

"Germany could be more ambitious in this area," he said, adding that Europe needs to restore investment to the levels seen before the global financial crisis.

Germany is by far the largest exporter of goods to EU and non-EU countries. In 2015, Germany accounted for 28.2 percent of the EU's exports of goods to non-member countries, and 22.6 percent of goods shipped to other EU member states.

On February 9, Germany's Federal Statistical Office announced that last year, Germany reached a record export surplus of 252.9 billion euros ($267.6 billion).

US President Donald Trump has repeatedly criticized German trade policy and threatened to place tariffs on imports from Germany such as cars. 

Last month he called the EU a "vehicle for Germany," and last week his adviser Peter Navarro accused Germany of exploiting the euro exchange rate for trade purposes.

German Chancellor Angela Merkel rejected the accusation that Germany is exploiting the euro exchange rate for trade purposes, and said that Germany has no influence over the behavior of the European Central Bank, which sets the exchange rate.

"Germany is a country that has always called for the European Central Bank to pursue an independent policy, just as the Bundesbank did before the euro existed," Merkel said.

Despite his criticism of Germany's lack of investment, Sapin told Handelsblatt that he doesn't agree with attacks on Germany's strong position within the Eurozone.

"The euro is the currency of the entire Eurozone. On the international level, what counts is the surplus of the entire Eurozone, not that of Germany."

Henri Sterdyniak of the French Economic Observatory (OFCE) told Sputnik Francais that encouraging German investment is one of several strategies which would help stimulate demand in less competitive Eurozone countries.

"Mr Sapin's position is not completely clear. Of course, the US is right: Germany is exploiting this situation in Europe. Germany has a very low exchange rate, particularly against the dollar, which explains its record surplus to a large extent. At 8.6 percent of GDP it is the largest in the world and exceeds the rather high average 6 percent average established by the European authorities," Sterdyniak said.

Sterdyniak said that the reluctance of German companies to reinvest their profits is causing a disbalance in the Eurozone, as well as globally.

"I must say that European integration has also led to countries being able to reach fabulous competitiveness without fearing the negative exchange rate consequences. The competitiveness of Germany doesn't suffer because of an increase in the currency's value, and that disturbs the balance in Europe and the world."

Similar criticism of Germany has been made by the IMF and ECB, which have called on Germany to increase investments in order to stimulate import demand and assist global economy recovery. 

At a meeting of the Asian Development Bank in Frankfurt in May 2016, ECB head Mario Draghi sought to lay some of the blame for slow economic growth in the Eurozone on "excess saving" by some countries.

"In a world where real returns are low everywhere, there is simply not enough demand for capital elsewhere in the world to absorb that excess saving without declining returns."

On February 5, German Finance Minister Wolfgang Schauble agreed that the Euro exchange rate is too low for Germany, but said the European Central Bank was responsible for pursuing a policy that is "too loose" for Germany.

"The euro exchange rate is, strictly speaking, too low for the German economy's competitive position," Schauble told Tagesspiegel

"When ECB chief Mario Draghi began with the expansive monetary policy, I told him he would drive up Germany's export surplus. I promised then not to publicly criticize this course. But I don't want to be criticized for the consequences of this policy."

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