Is Germany Destroying the Rest of the Eurozone Economies?
For the past decade Germany has become a major exporter and an economic super power. Some of Germany’s top exports are vehicles, pharmaceuticals, and mechanical parts(Workman). Germany was ranked 4th for the highest GDP in the world and in the past decade has shown a trade surplus. The country's economic policies are seem to be unrivaled and in the aftermath of a slowing Chinese economy Germany has managed to fill the void in supply left by China. However this doesn’t come without consequences.
As we know a country can’t produce at a surplus without another country experiencing a trade deficit. The country that has been given the short end of the stick due to Germany’s surplus was Greece. Germany has lent Greece money in the past to help make up for their trade, but now they are asking Greece to pay. However, Greece can not possibly pay Germany back as Greece has only posted a small trade surplus within the last three years as shown by the graph, and now in post economic collapse with no sign of recovery Germany may be waiting for quite some time for repayment. Without change in Germany’s economic policy the condition of the macroeconomy in the eurozone will continue to worsen.
Now you may be wondering how could you possibly come to a solution that fixes the economic problems of the eurozone as well as not disrupt the German economy. One solution rejected by Germany was to decrease Germany’s exports allowing Greece an opportunity to create a larger trade surplus and create economic growth. To address Germany’s loss of foreign trade it would be necessary for them to increase domestic consumption. To do this it would be necessary for the German government to increase government spending or to cut taxes, which since the government is currently operating with a surplus would be fiscally feasible(Mattich). This plan would allow the rest of the eurozone economies to stabilize while Germany continues to enjoy the benefits of going a decade without a trade deficit. However as well as this plan could work Germany has showed no signs of moving away from its foreign trade, and with multiple nations headed for elections it appears as though their will be no chance to change this in the next couple years(Associated).
The Associated Press. "The Latest: Obama: Time Not on Side of US-Europe Trade Deal." ABC News. ABC News Network, n.d. Web. 26 Apr. 2016. <http://abcnews.go.com/Politics/wireStory/latest-german-minister-us-budge-trade-deal-38629899>.
Workman, Daniel. "Germany's Top 10 Exports." Worlds Top Exports. N.p., 24 Mar. 2016. Web. 26 Apr. 2016. <http://www.worldstopexports.com/germanys-top-10-exports/>.
Mattich, Alen. "Why Germany's Record Surplus Isn't Helping the Eurozone."WSJ. N.p., 9 July 2015. Web. 26 Apr. 2016. <http://blogs.wsj.com/moneybeat/2015/07/09/why-germanys-record-surplus-isnt-helping-the-eurozone/>
Germany seems to have been an especially influential economic powerhouse in the past several years. Not only have they increased trade, but Germany has generally always had excellent manufacturing processes and quality good production. Germany is well-renowned for its efficiency in labor as well. According to many statistics, Germans have higher salaries and shorter hours than most other EU citizens. It’s no wonder they don’t want to back down as one of Europe’s best economies. On top of this, cutting taxes is not ideal for the German government, even though the income tax is near 50%. I also theorize that Greece will have a tough time for nearly a decade as they attempt to compete with Germany for foreign trade. Making payments to the German government will also be a drawn-out and difficult process for Greece.
ReplyDelete-Martin Mueller
Although it may seem unfair, Germany is not necessarily responsible for fixing Greece’s economic state, however I agree that they should try to help. While the Germans simply want their money back, there's different ways to negotiate payment, such as holding economic conferences to develop a system in which Germany doesn’t have to decrease its exports, which could possibly affect other countries such as the U.S. that buy German cars often. Nevertheless, I think you did a good job of using a visual to expand on your argument as it is clear how much Greece struggles to make up their trade deficit.
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