Europe needs Germany to lighten up

The Washington Post ^ | Tuesday, May 15, 2012 | Editorial Board

[MinorityRepublican]

IT MAY ALREADY be too late to prevent Greece from defaulting on its debts and leaving the euro, Europe’s common currency. But there still may be time to prevent Greece’s woes from dragging down the rest of Europe, and the world. For that to happen, though, Europe’s leaders must think clearly about the issues before them, especially the great “austerity vs. growth” debate.

When European and, indeed, U.S. critics condemn austerity, what they usually have in mind is the combination of tax hikes, spending cuts and structural reforms that Germany and other surplus-earning countries in the northern half of the continent, as well as the International Monetary Fund (IMF), are imposing on the debtors in the south, in return for financial support.

In their demand for growth, however, the critics fail to explain how to fund it. Countries such as Spain, Italy and Portugal have lost credibility in global bond markets — and competitiveness in the global market for goods and services. Under any reasonable scenario, even one in which Germany and the IMF relaxed deficit-reduction targets, these countries would still have to shed wasteful government programs, improve tax compliance and, most of all, make their labor markets more flexible.

What deserves more attention is the threat to Europe from austerity in the surplus countries. Despite its super-competitiveness with respect to its neighbors, Germany (and, to a lesser extent, the Netherlands) continues to slash budget deficits and restrain wages. Between 2008 and 2011, Spain cut unit labor costs by 8.5 percent, compared with the rest of Europe. That’s great — until you consider that Germany also cut its labor costs by almost 2 percent, maintaining its wide lead over everyone else.

[Moltke]

1. More debt is not an “investment” and does not lead to growth.

2. The government is the worst imaginable “investor” and should leave such things to the business world.

[Condor51]

ME to the Wash Compost Editorial Board -- go take a flying leap. It's not Germany's duty, job, nor responsibility to 'save' anyone but themselves.

FYI you socialist euro worshipers of the Compost, the EU and Euro is on life support. Prognosis - Fatal. 5-6 months to live. Don't believe me, fine. Search YouTube for Nigel Farage from the UK. He'll tel you the same thinks, jerkweeds.

[trebb]

LOL! Germany is the problem? LOL!

For sure - much of the Euro crowd was happy to do it because they would be boosted by Germany, Then they opted to do business as usual and screwed the pooch. Now they're pi$$ed because Gremany won't ruin herself by throwing good Euros after bad...

[cartan]

In their demand for growth, however, the critics fail to explain how to fund it.

Since when does growth have to be “funded?” Obama’s stimulus program sure involved a lot of funds, but where is the growth? This article was obviously written by a Keynesian lunatic.