- 2021-06-10
EU eyes Germany's high surplus
At the time when the latest Eurozone economic data was released, Pierre Moscovici, the European Economic Commissioner, criticized Germany's “unhealthy” huge surplus for making the Eurozone economy even more unbalanced. He said that he will closely follow the next German government's movements in this regard.
The chief economist of the German Ministry of Finance, Ludger Schuknecht, responded strongly to Germany’s criticism after the European Commission issued an article stating that without harming its own economy, Germany has limited room to reduce its trade surplus, and the current weak euro The situation is not caused by the German economy. If the euro zone can focus on improving the overall economic fundamentals and restore the strength of the euro, Germany's high trade surplus can be greatly eased. Moreover, the original intention of the EU's economic monitoring is to urge European countries to maintain their competitiveness and focus on strengthening economic vitality in order to truly create jobs and balance growth.
European Commission: Germany's high surplus is "unhealthy"
According to a series of economic indexes established by the European Commission, if a country’s surplus exceeds 6% of its GDP for a long time, it will affect the overall economic stability of the country and the Eurozone. At present, the total export volume of Germany has broken records for 7 consecutive years, and the trade surplus has been rising year after year. According to the latest data from the European Union, Germany's surplus in 2017 will be close to 9% of Germany's GDP.
By this measure, Germany has exceeded the standard for many years. In 2016, Germany’s trade surplus once again set a record, approaching 253 billion euros, reaching 8.7% of its GDP, returning to the world’s largest trade surplus economy; in 2015, Germany’s trade surplus accounted for 8.5% of GDP; in 2014 it was 7.5 %.
The Trump administration has criticized it. The director of the White House National Trade Council, Pienavaro, said on January 31 that the euro is currently "seriously undervalued", which harms the interests of the United States and other EU member states. The current status of trade imbalance, and its cause is Germany's manipulation of the euro exchange rate.
The European Commission also pointed out in the annual "Economic Monitoring Report": "Solving the trade surplus will affect the rebalancing of the economic prospects of other countries in the euro area: if Germany has stronger domestic demand, it will help solve the problem of the euro area. Low inflation in the country and ease the deleveraging needs of highly indebted member countries."
At present, the public deficit problem in highly indebted countries such as France and Italy is still relatively serious: for example, in 2016, Italy's public deficit accounted for nearly 130% of GDP, and France was also close to 98%. Moskovich also called on the German government to continue to increase public investment and promote domestic consumption, and the EU will then continue to make relevant recommendations in accordance with the governance of the new German government (in September). At the same time, the EU hopes that Germany will invest more in education, research and development and innovation.
However, Léon Cornelissen (Léon Cornelissen), chief economist of the asset management company Robaco, does not believe that the election of any party will cause the German government to change its fiscal policy. In an interview with a reporter from China Business News, Knellison said that no matter whether Germany is in power by the CDU or the Social Democratic Party, it is unlikely that the current fiscal policy will be changed. Regarding Germany's high surplus, we should not study what should be done now, but consider whether Germany will do it. But this is not a partisan issue, it is ultimately a matter of German cultural traditions in this regard.
De's response: The high surplus is not my fault
This is not the first time the European Commission has criticized Germany for its high surplus. Since 2014, the European Commission has mentioned Germany's high surplus in its annual Economic Monitoring Report, but Germany has always turned a deaf ear to this. But the criticism of the European Commission this time made Germany uncomfortable.
Earlier, Germany has been accused by the United States of high surplus and dumping in disguise by relying on the weak euro. At the same time, France's extreme right-wing national front presidential candidate Le Pen also criticized Germany for manipulating the euro zone. The confluence of populism in the United States and Europe has made Germany feel more anxious.
Schucknecht responded in the article: "It is meaningless to condemn Germany based on current account figures without the support of other economic indicators. Such evaluations will only trigger political debates and contribute to the resentment and division of Germany in Europe and other countries. Provide fertile ground.” Schucknecht believes that real wages in Germany increased by 1.8% in 2016, much higher than the Eurozone average. These wage increases, combined with strong employment growth, have led to strong domestic demand in Germany.
Second, Germany's public investment growth rate reached 6.7% in 2016, but public investment including infrastructure does not have to import products from other European countries such as Portugal or Greece. Schucknecht said that from this point of view, the spillover effect of Germany's fiscal policy has not had a significant effect on other EU countries, so the European Commission has no reason to let Germany continue to carry out new fiscal stimulus.
Schucknecht changed his pen and pointed out that the current European Central Bank’s monetary policy is still extremely loose and the euro zone economy is slowly recovering. This will eventually ease the pressure on the European Central Bank and make the euro return to its strength. “A strong euro will also reduce the euro area. Trade surplus with Germany".
To this end, the Eurozone should carry out more banking reforms and structural reforms. Schuknecht pointed out that the European Commission should also focus on maintaining competitiveness and promoting growth in all countries. Eric Schweitzer, chairman of the German Chamber of Commerce and Industry, said that Germany's huge surplus reflects the competitiveness of the German economy and shows that countries have a rigid demand for high-quality "Made in Germany" products.