Mar 31, 2010

Blame Germany!

The French economy minister, Christine Lagarde, has found the problem with the EU: Germany. Indeed, it is too productive, and Germans save too much and consume too little, which is clearly not "sustainable for the long term". In an interview with the FT, she said Berlin should raise wages to make its workers less competitive. Is she on crack? Apparently, the FT thinks she is the best minister of Finance of the Eurozone. Is everybody on crack?

8 comments:

Maribou said...

Yes, and also let's penalise the poor for being too poor to make any meaningful contributions in this world (I'm being sarcastic, for any crazy wackos out there who would take my comment seriously...)

Katya said...

heh. and thus the "surplus country" burden gets allocated to a developed country too! it was about time. i say they are all on crack. so you think the social redistribution mechanism does not really work on a cross-country basis?

Pierre-Louis said...

redistribution yes, but not in the form of intended mediocrity!

Christoph said...

Well, Germany benefitted quite a bit from the Euro. Its export success (and growth) since the early 2000s is due to a combination of wage moderation and a stable exchange rate (apart of record demand for investment goods from EMEs). But while exports soared, real income has actually decreased (the share of labor income has dramatically dropped). There is no need to drastically reduce the competitive advantage as Wyplosz writes in todays vox column. However, Germany definitely has a domestic demand problem and there are god reasons to increase wages at home. So Mrs Lagarde is saying something few politicians in Germany dare to: Germany needs to stop solely focus/relying on export surpluses and try to increase wages and domestic demand instead, at least moderately. This will be of interest for Germany, as for the sustainability of the Euro.

Christoph said...

PL: It's of course not about intended mediocrity!

Besides the two recent Martin Wolf columns on the issue, this is worth reading:

http://www.eurointelligence.com/article.581+M5db95c409f9.0.html

Pierre-Louis said...

well I dont think this is an economic debate as I just think Lagarde is completely retarded for asking for something like that but anyway...
I think Germnay's success should be attributed to competition at home which keeps both prices and wages low but increases productivity and exports.
France on the other hand has an imcompetent workforce and interferes with market competition...this is what nneds ot be adjusted! not an artifical productivity slowdown in Germany!

TomasH said...

The idea is retarded. Let's not forget that there are other subjects (countries) in the world outside of the EU.

If the Germans did adjust the way she proposes , it would restore French competitiveness relative to the German one, but Germany would loose "international" (outside of the EU) competitiveness.

The south, not the North needs to do the BIG adjustments. This way EU countries can compete within EU (France can compete with Germany), while the EU as whole will remain (or get) competitive internationally (Germany can compete with China).

Katya said...

yeah yeah. just blame it all on china....