Nach SPIEGEL-Informationen schlug der Vize-Chef der Organisation, David Lipton, bei seinem Besuch im Bundesfinanzministerium in der vergangenen Woche vor, Deutschland solle sich verpflichten, seine Überschüsse zu reduzieren. Die Bundesregierung solle eine konkrete Zielgröße festlegen, die künftig nicht mehr überschritten werden dürfe.It's not the first time the last couple of years that Frau Fritz has found her policies the target of IMF criticism. (Markus Dettmer and Christian Reiermann, Merkel Maligned: IMF Board Attacks Euro Crisis Management Spiegel International 06/03/2013; Nicholas Kulish and Annie Lowrey, German Leader and I.M.F. Chief Split Over Debt New York Times 03/09/2012).
[According to Spiegel's information, the Vice-Chief of the organization, David Lipton, during his visit in the Federal Finance Ministry in week before last, recommended that Germany should commit itself to reduce its [current account] surplus. The government should set a target amount, he recommended, that in the future should not be exceeded.]
As Spiegel points out, the IMF's reported recent criticism is in line with that in the US Treasury Department's Report to Congress on International Economic and Exchange Rate Policies 10/30/2013, which said:
Within the euro area, countries with large and persistent surpluses need to take action to boost domestic demand growth and shrink their surpluses. Germany has maintained a large current account surplus throughout the euro area financial crisis, and in 2012, Germany’s nominal current account surplus was larger than that of China. Germany's anemic pace of domestic demand growth and dependence on exports have hampered rebalancing at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports in order to promote adjustment. The net result has been a deflationary bias for the euro area, as well as for the world economy. (p. 3) [my emphasis]
Several very large and persistent surpluses have seen no adjustment in some cases (Germany, Taiwan) or have widened further in others (Korea). The euro area's overall current account, which was close to balance in 2009-2011, increased to a surplus of 2.3 percent of GDP in the first half of 2013. Germany's current account surplus rose above 7 percent in the first half of 2013, while the current account surplus for the Netherlands was almost 10 percent. Ireland, Italy, Portugal and Spain are all now running current account surpluses as import demand in those economies has declined. Thus, the burden of adjustment is being disproportionately placed on peripheral European countries, exacerbating extremely high unemployment, especially among youth in these countries, while Europe’s overall adjustment is essentially premised on demand emanating from outside of Europe rather than addressing the shortfalls in demand that exist within Europe. (p. 10) [my emphasis]
The euro area economy expanded by 1.2 percent, on a seasonally adjusted, annualized basis (saar), in the second quarter of 2013, marking the first expansion of economic activity in the euro area in seven quarters. Expansion was supported by domestic demand growth in Germany - though growth in Germany still continues to rely on positive net exports, which continues to delay the euro area’s external adjustment process – and on domestic demand in France. Economic conditions across the euro area remain uneven with the countries in the periphery remaining in recession overall. Ireland and Portugal expanded on a quarter-on-quarter saar basis in the second quarter, but this may have been the result of transitory factors such as weather, and the economies of Greece, Italy, and Spain continued to contract during the same period, albeit at a more moderate pace. (p. 24) [my emphasis]It's a sad, astonishing record, with Germany and the eurozone repeating some of the best-known mistakes of the Great Depression: the gold standard then, the eurozone now; Heinrich Brüning/Herbert Hoover policies then, Brüning/Merkel policies now.
The Treasury report deals with the reality that Germany's current relatively favorable economic situation is a function of the excessive German current account surplus, which is the flip side of the brutal austerity policies in the euro periphery countries:
Euro area deficit countries have sharply reduced their current account deficits, but euro area surplus countries have not reduced their current account surpluses. The euro area's overall current account swung into surplus in 2012, and the surplus has increased further in the first half of 2013 to almost 2.3 percent of GDP. The Netherlands and Germany have continued to run substantial current account surpluses since 2011, while the current accounts deficits of Italy and Spain and the smaller economies in the periphery have contracted significantly, primarily as a result of a collapse of domestic demand and falling wages. Ireland, Italy and Spain have run surpluses in recent quarters, and Portugal moved into surplus in the second quarter of 2013. Germany’s current account surplus, meanwhile, rose above 7 percent of GDP in the first half of 2013, with net exports still accounting for a significant portion (one-third) of total growth in the second quarter, suggesting that rebalancing is not yet occurring domestically. To ease the adjustment process within the euro area, countries with large and persistent surplus need to take action to boost domestic demand growth and shrink their surpluses. Germany has maintained a large current account surplus throughout the euro area financial crisis, and in 2012, Germany’s nominal current account surplus was larger than that of China. Germany’s anemic pace of domestic demand growth and dependence on exports have hampered rebalancing at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports in order to promote adjustment. The net result has been a deflationary bias for the euro area, as well as for the world economy. Stronger domestic demand growth in surplus European economies, particularly in Germany, would help to facilitate a durable rebalancing of imbalances in the euro area. The EU’s annual Macroeconomic Imbalances Procedure, developed as part of the EU's increased focus on surveillance, should help signal building external and internal imbalances; however, the procedure remains somewhat asymmetric and does not give sufficient attention to countries with large and sustained external surpluses like Germany. (p. 25) [my emphasis]Continuing directly, the Treasury report describes what Heinrich Brüning policies look like today:
In 2012, the euro area, in aggregate, undertook one of the most aggressive fiscal consolidations of the advanced economies despite having the smallest cyclically-adjusted fiscal deficit and weak growth prospects. While the pace of consolidation has moderated somewhat this year, the euro area structural fiscal deficit is expected to decrease by another 0.9 percent of GDP in 2013.Tags: angela merkel, austerity economics, eu, euro, european union, neoliberlism
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