Economics

如何减少德国的盈余

Jul 21, 2017 Hans-Werner Sinn

慕尼黑—《经济学人》（The Economist）最近报道说，德国的经常项目盈余太高了。这是对的。但德国的盈余为什么这样高？有人说德国出口量大是因为其制造的产品质量高，也有人认为德国进口太少，因为工资太低了。

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还有人指出，根据定义，一国的经常项目盈余等于其资本出口。因此，德国存在储蓄大于投资的盈余，它需要的是减少储蓄，增加投资。

当然，德国的经常项目盈余也反映了其他国家的赤字，包括美国。美国占了世界经常项目赤字总额的三分之一左右。因此，有可能很快就会有人呼吁赤字国增加竞争力、降低工资、增加储蓄且减少投资。

以南欧重债国为例。尽管它们在外债利率降低的条件下，成功地实现了经常项目平衡，但它们可以通过大量盈余来偿还债务。

但权宜之计无法让我们走得很远。要确定应该怎样作出调整，首先需要理解为何过剩的资本是从德国流向世界其他国家。

依我之见，美国联邦政府的极端的负债和任性的预算是问题的主因。美联储用宽松货币政策为美国经济续命，而其本身系建立在有限责任的消费者和家庭贷款的基础上。美国之所以可以一直保持入不敷出状态，是因为它可以向全世界发售美元计价债务，而这又是因为美元是世界主要储备货币。但这一方针形成了一个基于零售的经济和一个脆弱的国内制造业部门。

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另外一个问题是欧元区。采用欧元大大增加了南欧国家的信誉，因为欧元国家可能破产的情景让人无法想象。毕竟，它们有权利印制其他国家接受其法币地位的钞票。这一人为制造的安全感的后果是大量私人资本流入南欧，直到2008年前后才发生逆转，这造成了通胀性信用泡沫，毁掉了这些国家的竞争力。

当金融危机爆发时，南欧欧元区国家利用它们的印钞权利，实质上从欧元系统中借取它们在市场中无法借到的资金。它们用这些资金来偿还旧债、继续购买商品，以及买入国外的房地产和其他资产。

此外，欧洲央行通过其直接货币交易提供了免费的保险，大胆的投资者继续不断地将钱投向南欧。毫不奇怪，所有南欧国家都出现了债务-GDP比率不断上升到情况，尽管它们在2012年的加强版财政契约中承诺要逐年降低这一比率以逐渐向马斯特里赫特条约规定的60%的上限靠拢。

危机期间，过度的凯恩斯主义让欧元区债务国得以合法逃脱预算约束，这也导致了资本从德国吸出，而实际上，投资者在试图从南欧撤出。这刺激了进口，从而让德国经常项目盈余继续增加。

但德国并没有从这一局面中获利，因为它从赤字国得到的债券和票据基本上都不再产生利息，并且偿还也变得越来越不确定。事实上，如今德国通过其过去的经常项目盈余所积累的净外国资产大约有一半全都是德国联邦银行资产负债表上的Target债权，目前规模高达8,610亿欧元。

根据欧元系统的规则，Target债权反映了德国联邦银行被迫为欧元区赤字国扩展的融资，方式是为它们的支付指令授信。德国联邦银行永远无法宣布这些债权到期、应付，而欧洲央行理事会规定这些债权的利息为零。

在这样的背景下，降低德国经常项目盈余似乎应该采取双管齐下的方法。首先，如Ifo研究所主席所建议的那样，德国可以为私人投资引入折旧许可。这将有助于引导一部分目前流向其他国家的资本流回德国国内用途。

其次，南欧欧元区国家和美国可能最终回归讲纪律的债务管理政策。这将减少它们来自德国的进口，从而降低用经常项目盈余衡量的德国的资本流出。特别是，美联储和欧洲央行需要退出宽松货币政策——特别是欧元区所保证的财政援助计划，该计划人为地将资本导向了南欧。

从逻辑上看，德国无法同时降低其经常项目盈余并且保持向其他国家扩展廉价公共和私人贷款。如果政客们明白这个基本事实，事情就会好办很多。

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Hans-Werner Sinn

Writing for PS since 2002
111 Commentaries

Hans-Werner Sinn, Professor Emeritus of Economics at the University of Munich, is a former president of the Ifo Institute for Economic Research and serves on the German economy ministry’s Advisory Council. He is the author, most recently, of The Green Paradox: A Supply-Side Approach to Global Warming (The MIT Press, 2012).

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Antonio Foglia Aug 15, 2017

Prof. Sinn laments that the Bundesbank, the German Central Bank, is currently financing Southern Europe’s previous current account deficits at a penalizing interest rate for Germany through the European Central Bank’s Target 2 settlement system. Indeed, as he says, Germany has transferred to Target 2 balances half of the credits it had accumulated towards the rest of the world thanks to previous current account surpluses.

Rather than penalizing Germany, as he implies, this represents a massive bailout of the German financial system which has in fact been allowed to exchange its potentially souring credits towards Southern Europe for safer Target 2 balances at the ECB. These balances are secure, since unlike the credits on the Periphery they are toward an institution that may print Euros to repay them, and are also guaranteed by all of the ECB’s shareholders. Germany has actually been allowed to mutualize the massive souring vendor financing that has accompanied its current account surplus.

In a currency area, if a country runs a persistent current account surplus towards some other countries, it can’t but export capital to those countries too in order to allow them to pay for their additional imports. This is precisely what Germany has been doing since the beginning of the Euro and up the crisis that rebalanced the Eurozone current accounts. Weather it did it directly or through the French and British banking systems is irrelevant: the flows were ultimately from Germany to the Periphery.

These flows were the functional equivalent of vendor financing, a commercial strategy to support sales that may sour when the goods being financed fall in value or when the purchasers accumulate too much debts. Both happened in the Eurozone crisis and hence German and other countries’ banks scrambled to repatriate the credits they had extended to the Periphery.

As this credit was repatriated, the banks in the Periphery had to fund at their Central Banks and these pulled money from the ECB through Target 2. At the same time, the German banks didn’t have any use for the repatriated Euros and parked them at the Bundesbank which lent them back to the ECB through Target 2.

While it is true that Target 2 allowed the ECB to help banks and governments in Southern Europe, it is also true that banks in Germany would have also failed without it since Target 2 allowed them to repatriate over € 500bn of credits that were souring without any losses. Without Target 2, Germany would have realized that it is impossible to suddenly withdraw massive credit without suffering severe losses and that the best way to manage a debt crisis, for both creditors and debtors, is a negotiated solution to the mistakes they both made. Instead, what was a German private sector issue, the credits created by its vendor financing, became a German public sector issue, Bundesbank’s credits on Target 2. And German private sector’s bad credits were effectively mutualized without adverse consequences for Germany as they were unloaded onto the ECB.

In the aftermath of the Eurozone crisis, the imbalances that led to these problems are now much smaller. But legacy issues remain to be solved. Prof. Sinn correctly notes that it is difficult to say if the German current account surplus originates from German labor and product competitiveness or from excessive German savings or from the opposite phenomena in countries who run persistent current account deficits. Now that in the Eurozone the imbalances are smaller, policies in each country should seek to avoid a repeat.

This is proving difficult because Target 2 and the ECB have mitigated the consequences to creditors and debtors of their mistakes. In June 2012, market pressures had made evident to politicians what their mistakes were, and a roadmap to solve the Eurozone inconsistencies was drawn. Little progress has been made down the fiscal, banking and transfer unions since then, thanks to the brilliant immediate relief to market pressures provided by Draghi’s “whatever it takes”. But that should only have bought time for political decisions that in essence never came. And this has now become counterproductive since the creditors were bailed-out and feel no need for discipline on their current account surpluses, while the debtors don’t feel pressure for the necessary restraint and reforms other than through European institutions which, unfortunately, makes them more unpopular by the day.

Yet Southern Europe has been fiscally more restrained than the Core since the founding of the Euro, making legacy public debt an issue for which current generations are less responsible for and hence similar, in a way, to war debts, on the mismanagement of which Germany has suffered some worrisome history. On the other side, the suppressed real wage growth in Germany, which boosted its competitiveness and facilitated its Reunification, left it with massive potential bad credits that Europe has already mutualized. There should be ground for a political compromise on legacy issues here, before the markets enforce their harsher discipline again. But time is running out.
- Hans-Werner Sinn Aug 19, 2017
  
  In my article, I alluded to the empirical fact that Germany's Target claims are half of the country’s net-foreign-asset position, which itself results from the accumulated current-account surpluses of the past. Antonio Foglia takes up this side remark to repeat the juicy narrative about the origins of these balances that he and other authors, including Yanis Varoufakis, have emphasized in the last few years: that Germany welcomed, or should have welcomed, the Target credit to rescue its own banks and carry out vendor financing.
  
  Yes, we can agree that the first wave of Target balances that accumulated until August 2012 resulted from the bailouts of the Eurosystem, preventing a default of the Southern eurozone members’ banking systems and governments, and that these bailouts also helped the foreign creditors, among them the German banking system.
  
  But not only German banks were bailed out. While German banks were lending to the whole world, and thus may have indirectly helped finance the credits to the South and to Ireland, they were not the most exposed lenders. At the time of Lehman Brothers’ collapse in 2008, the exposure of the French banking system to Southern Europe and Ireland was a bit bigger than that of German banks, even though France has a significantly smaller economy. Among those being bailed out, the British banks took third place, followed by the Dutch. British and French banks were not net lenders in global terms. They acted as hubs, distributing the savings flows, which largely came from Germany, to the rest of the world, including Southern Europe. Nevertheless, most of the triangular bailouts resulted in the Bundesbank's Target claims, as French and British banks repaid their credits from Germany when they stopped lending to Southern Europe and Ireland.
  
  Who wanted the bailouts? Was it the Bundesbank trying to rescue German banks along with French and British banks, as Foglia claims? I doubt it. The Bundesbank was largely opposed to the ECB’s bailout activities, arguing that the banks themselves, rather than European taxpayers, should bear the write-off losses. In many crucial decisions by the ECB Governing Council, the Bundesbank was simply outvoted. In fact, Bundesbank President Axel Weber and ECB chief economist Jürgen Stark both began protesting the bailout activities in 2010 – and resigned in 2011. The current Bundesbank president, Jens Weidman, has continued protesting publicly as well.
  
  And who carried out the bailouts, the ECB or the Bundesbank? Strictly speaking, neither one: The bailouts reflected the decisions of Southern Eurozone members’ central banks and the Irish central bank to exploit the existing scope for local money printing and the additional scope generated by the ECB Governing Council’s policy decisions. In the first wave of Target balances, the ECB’s most important active decision was to reduce collateral requirements for refinancing credit. The ECB also accepted as collateral securities that were not traded and tolerated assets created by “ring trading” among banks, which meant that no effective collateral was provided.
  
  The existing scope for local money printing came from “emergency liquidity assistance” (ELA) and the secret Agreement on Net Financial Assets (ANFA). ELA credit was generated in the hundreds of billions of euros by local central banks, as only a two-thirds majority in the ECB Governing Council could have stopped it. The ANFA agreement gives national central banks the right to local money printing for a limited set of purposes. Banca d’Italia, for example, used ANFA to purchase for more than €100 billion ($118 billion) in government bonds from the Italian banking sector.
  
  All of these measures implied that the national central banks of Southern Europe and Ireland provided local commercial banks with the public credit that enabled them to repay the private credit international lenders were no longer willing to provide or roll over. Simply put, when the crisis erupted, the affected countries legally “printed” the money they could no longer borrow to fulfil their international payment obligations.
  
  Printing is only a figurative term, though, as the extra liquidity was used for electronic international payment orders to other countries, which are reported as Target liabilities and claims on the national central bank’s balance sheets. The payment orders forced the recipient countries’ central banks to credit the payments. As a result, these central banks – above all the Bundesbank – became the ultimate providers of the extra refinancing credit issued by their counterparts in Southern Europe and Ireland.
  
  In the process, all of the money issued by the Bundesbank turned out to be payment-order money, or “outside money,” to use a technical term introduced a half-century ago by John Gurley and Edward Shaw. The “inside money” resulting from the Bundesbank’s loans of freshly made money to German firms was gradually crowed out by the abundance of outside money.
  
  Note also that the Target balances by no means reflected only the bailouts of existing foreign credit accumulated through previous current-account balances. They also reflected to a considerable extent new current-account deficits that were built up during the first few years of the crisis until 2011. (The details are reported in Chapter 7 of my book The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs.) Moreover, the money from the printing press, as well as from the international fiscal rescue operations served to finance capital flight by domestic investors to other countries.
  
  In a detailed study of Greece, I showed that from the beginning of the crisis until March 2015, the overall public credit provided by fiscal institutions and the Eurosystem to the Greek economy was €325 billion (182% of Greece’s GDP). Of this sum, about one third was used for retroactive financing of pre-crisis current-account deficits; one third was used to finance new current-account deficits; and one third was used to finance Greek citizens’ capital flight. Even in 2016, the sum of Greek private and public consumption was more than 10% above Greece’s net national income.
  
  As for Foglia’s vendor financing narrative, did Germany really initiate Target financing for the purpose of selling its products to the South?
  
  Again, it is useful to look at the facts. When the euro was formally announced at the European Council’s Madrid Summit in 1995, it was made clear that exchange rates would be irrevocably fixed. This caused the rapid elimination of the previously huge interest-rate spreads in Southern Europe within two years, triggering additional private and public credit. When the resulting inflationary bubble burst in 2008, it left behind overpriced torsos of once-competitive economies. Yes, the German current-account balances to some extent resulted from the Southern European and Irish imports that French, German, and British banks had financed; but it would be an exaggeration to accuse the French and British banks of serving Germany's secret vendor financing plan.
  
  In contrast to those, like Foglia, who embrace the vendor credit narrative, I tend to believe that it was the euro as such that caused the excessive credit. The French, German, and British creditors surely would not have been as negligent as they were had they not anticipated that the euro would make bankruptcies of borrowing countries highly unlikely. After all, the printing presses in their basements would enable these countries, in case of emergency, to service their debt with a currency that other countries would have to accept as legal tender. Again, history vindicated these expectations. The implicit debt mutualization provided by the very existence of the euro as a currency provided by local central banks, rather than the ECB, had eliminated the interest-rate spreads and caused the bubbles in the South, which in turn resulted in these countries’ trade imbalances with Germany.
  
  What about Foglia’s suggestion that, measured by the Target balances, Germany benefited from the bailouts?
  
  It is true that the Bundesbank’s €857 billion Target claim is mutually guaranteed by all national central banks in the eurozone. Here, Foglia is formally right. If Target deficit countries default, by all central banks that remain in the Eurosystem will share the write off losses. But if the eurozone breaks up, the Bundesbank will be left claims against a system that no longer exists. No burden-sharing rules have been agreed for such a scenario. In all likelihood, the Bundesbank would lose its claims, which makes Germany vulnerable to blackmail in the upcoming negotiations about a European fiscal union.
  
  But the outright write-off losses are not the main issue. Economic losses that take place anyway would merely have to be booked. The point is that the Bundesbank has Target claims that it can never call due – and that carry a miniscule rate of interest equal to the ECB's main refinancing rate. The ECB, meanwhile, reflecting the wishes of a majority of countries with substantial external debt positions, has set the refinancing rate equal to zero, and will likely keep it in that neighborhood for a long time, to prevent financially shaky eurozone states from defaulting. But what is the present value of a claim on an interest flow that will likely remain very close to zero for a very long time? And what is the value of a mutual guarantee by all central banks that they will service a zero rate of interest for a debt that will never expire?
  
  In my opinion, the Bundesbank's Target claims imply a creeping, silent, and unspectacular, though elegant, expropriation of German taxpayers that allows the Bundesbank and the German government to save face, but will nonetheless impose on the German state a burden whose present value comes close to the face value of the Target claims. It follows from this interpretation that Germany has actually given away about half of its net foreign wealth, which by definition is its accumulated current-account surplus net of other write-off losses.
  
  My concerns are becoming even more acute in view of the new surge in Target balances that has occurred since the summer of 2014. As the ECB rightly argues, this surge has little to do with the first wave culminating in 2012, which resulted from bailouts with the local printing presses and capital flight. Instead, it is more or less a technical reaction to the ECB’s program of quantitative easing (QE). This does not improve the situation, though; on the contrary, the Target balances now result from a planned asset swap that replaces nasty private creditors from abroad with the Bundesbank and a few other benevolent central banks.
  
  As the QE program is symmetrical and based on the juste-retour rule to the extent that it applies to government bonds, it is not straightforward to understand why the Target balances, which proxy asymmetries among the euro countries, could arise in the first place. After all, each central bank repurchases its own government’s bonds in strict proportion to country size. Nevertheless, the asymmetries result from the fact that the bonds issued by Southern European countries have been largely dispersed outside these countries, because they were sold to foreign investors to finance the pre-crisis current-account deficits. The process of returning these bonds to the country of origin involves international payment orders that augment the Target balances.
  
  To grasp this process, suppose a German insurance company sells a Spanish government bond to Banco de España. In this case, the latter gives a payment order directly to the Bundesbank asking it to make new money and give it to the seller, thus crediting the payment order. This transaction is an asset swap that converts an interest-bearing securitized Spanish debt held by a private creditor into a permanent book debt of the Spanish central bank vis-à-vis the Eurosystem. This debt carries a zero rate of interest and can never be called due. True, the Spanish central bank now has the government bond, and the Spanish state formally retains its debt. However, according to the juste-retour rule, the returns on the government bond (beyond the main refinancing rate, which in any case is zero) belong exclusively to the Spanish state. In Germany, on the other hand, the seller now has money that is a claim on the Bundesbank, and the Bundesbank has a zero-interest Target claim on the Eurosystem that it can never call due.
  
  The Bundesbank is also involved in triangular asset swaps clearing the Spanish debt with other countries. If, for example, the Spanish central bank buys a Spanish government bond back from an investor in Shanghai, and this investor invests in Germany – say, by buying a German company – the end result is again that the Bundesbank has a Target claim, the Spanish central bank has a Target liability, and the German seller of the company holds money which is a claim against the Bundesbank. However, the German company now belongs to the Shanghai investor, while the Spanish government debt has basically been wiped out in economic terms and replaced with a book debt vis-à-vis the Eurosytem.
  
  Of course, this is only an example. But foreign investors have indeed tended to bring their money to Germany, which is one of the reasons for the unprecedented overheating of its economy, as measured by the Ifo indicator or architects’ stock of unfilled orders. Currently, the outside money issued by the Bundesbank to fulfill payment orders from other countries inside and outside the Eurosystem stands at about 30% of the entire eurozone monetary base. This is more than the 26% the Bundesbank would normally have issued as inside money in a fully proportional and symmetrical equilibrium.
  
  Are these good deals for Germany? Is it vendor financing that allows German exporters to keep producing goods for the rest of the world?
  
  At best, the correlation between these semantics and what actually happens in the Eurosystem approaches zero. The German economy is definitely not gaining. One should not confuse the German economy with the German export sector. The country has become an innkeeper where customers can buy unlimited drinks and the proprietor can chalk up his claims, but with no right to demand payment or charge interest. If his clients are ultimately unable or unwilling to pay their tabs, he has earned no money; he has merely lost time and resources.
  
  The situation is serious, and it cannot be resolved with superficial and false narratives. On August 16, Germany’s Constitutional Court expressed for the second time its opinion that the ECB is overstepping its mandate and violating the Lisobon Treaty’s prohibition of monetizing the state debt, and it again appealed to the European Court of Justice concerning the purchases of government bonds by the Eurosystem. The ECJ may once again side with the ECB, as it did in its ruling on outright monetary transactions. But the ECJ probably cannot afford an open confrontation with the German court, which ultimately is the only legal institution with the authority to rule on whether a European Union policy is compatible with Germany’s constitution. And the constitution is very clear about giving budgetary authority to EU institutions. The power of the purse belongs solely to the Bundestag; its full or partial transfer to a European institution would require a referendum in Germany.
  
  So, what should we do? In my opinion, the QE program has to stop now, and we should offer debt relief to those countries that cannot service their debt, allowing them to exit the euro temporarily and recover by way of devaluation. This would help these countries get back on their feet by boosting their competitiveness. The debt relief would have to be negotiated in a European debt conference and include all kinds of debt, including bank debt, state debt, and the Target debt. Such a strategy would hurt the creditors, including Germany; but it would lead Europe back to a sustainable equilibrium, as most debt-relief plans have done.
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Joulie benoit Jul 26, 2017

Il faut ajouter que les QE contribuent lourdement à l'amélioration de la croissance, les remettre en cause rapidement ne peut qu'aggraver la situation des chômeurs et donner des arguments de plus aux populistes et aux extrémistes !
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Mauricio Duran-Loriga Jul 26, 2017

The German crocodile is alive and well. He is telling the unsuspecting frogs..."stay, the water is warm".

German surplus is unavoidable under the Eurosystem. Same as for the imbalances in Target2.

The Euro was the stealth bullet used by Germany to extract maximum wealth out of Europe, without firing a single shot.

Germans better start saving like wild hermits, because nothing lasts forever. Germtany's surplus will endure the Icarus trade. Tic Tac
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Joulie benoit Jul 25, 2017

Bonsoir,
C'est une analyse classiquement Allemande de la situation économique mais elle est foncièrement erronée :
L'innovation majeur de ces dernières années, est l'introduction des QE, Bernanque, sans le comprendre à l'époque, a permis, avec les QE, de pallier aux tendances fortes des marchés en luttant efficacement contre les pressions déflationnistes, la BCE doit se préoccuper du chômage et pas seulement de l'inflation, dont on peut douter qu'elle revienne facilement. les agents ont des choix démultipliés qu'ils n'avaient pas avant, constituants des forces efficaces contre la hausse des prix.
Annuler les taux d'intérêts est une solution qui favorise un transfert massif des rentiers et des personnes âgées vers les projets des jeunes, c'est bien meilleure que la situation antérieure.
La croissance économique est loin d'être suffisante pour freiner les QE, dont on peine à expliquer les inconvénients !
- M M Jul 26, 2017
  
  Joule, tout a fait d'accord avec votre analyse.
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Anold Man Inthe Jul 23, 2017

This 'Free Protection', was protection for the European Union, of which you're part of... Or does Germany want the EU to dissolve?
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Anold Man Inthe Jul 23, 2017

And Germany has not take any advantage, with it's fixed exchange rate to the rest of europe(greatest market for German exports), and with negative interest on the treasury bonds?
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Anold Man Inthe Jul 23, 2017

Do they? Citations needed!
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Anold Man Inthe Jul 23, 2017

How long did it took for Germany to get its surplus, from comulative deficits in the 90's? More or less 10yrs, and that's without a global crisis... This author seems to have forgotten his country recent history!

Also, do not devalue the effort the southern countries did with the austerity measures!
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Peter Schneider Jul 23, 2017

On which legal basis the Bundesbank can be forced to credit payment orders by Club Med worth 860.763.854.658,11 euros unsecured and free of interest? This is more than three times the annual German budget. Why is it not prohibited by TFEU art. 123? Who is in control of the German budget? The German parliament or the "E"CB? Why is the German parliament not asked?

In the English version of this article it says the Bundesbank could be forced "according to the rules of the euro system". This is not mentioned in the German version.
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Henry Rech Jul 21, 2017

Instead of internal German revaluation, Germany has forced internal devaluation in southern Europe, via the political/financial means available to it within the EZ. As other commenters have mentioned, this has had the net effect of keeping the Euro weak, the German economy being the prime beneficiary. Why would they want to have this situation upturned?

The southern internal devaluation has not improved the competitiveness of these countries to the extent they are now prospering greatly. It has however brought them austerity and macroeconomic dislocation. Their horrendous debt burdens hobbling any progress.

The question is, who now owns this debt after the huge asset purchases by the ECB/national CBs? Has this debt been taken out of private hands and effectively publicly mutualized and monetized. And as Sinn points out, a good deal of the debt is irreparable T2 claims.

Why not recognize this de facto bailing out of the southern economies and allow them a debt respite? As perverse as it might seem, internal revaluation/reflation of the southern economies would take the risk discount off the Euro and have Germany's external economic performance reflected in the Euro.
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M M Jul 21, 2017

The author of this article has missed to mention or to even consider the "elephant in the room" and it is called the "euro". The euro does not only belong to Germany, it belongs and it is used by 19 EZ member states. The only way to address this German apocalypse (which is also called surplus) is for Germany to get out of the EU, the EZ and out of the Euro all together, albeit may be for a short while (a decade or two), and then everything will be corrected " in the normal way"...
- M M Jul 22, 2017
  
  Vicky, the same can be said of your arguments, the destruction began back in 2010and at the hands of the German establishment. History has been written, this kind of article shall not distort the truth and I do live in the real world unlike the author and one can even say any defender of the author's opinion.
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- Vicky Lavendel Jul 21, 2017
  
  Read his last paragraph again! The cheap loans actually have become part of the euro system. These cheap loans could either be stopped by strictly following the Maastrcht rules or the end of the eurozone. By the way, Germany leaving the eurozone would be the end of the eurozone. If you suggest otherwise you are either a hypocrite or you have no clue about the topic at all.
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Alex Leo Jul 21, 2017

This is where theoretical arguments become useless. Germany produces good quality goods with overhyped brands and german businesses are the master of corruption and deceipt (Siemens probes, Sothern Europe debt crises, selling the most expensive cars to the country leadership of these "friendly" nations, the VW scandal in the US, etc. - to name a few undisputable items from the public domain). What if Germany were instead to do what the US did for them, invest in Bulgaria, Serbia, Portugal, have them produce cars and whatever and even allow them market protection? This would keep the young employed in their countries but profits would fall. . .No brainer, right, they are needed in Germany to help pay for German retirees. . .
- Vicky Lavendel Jul 21, 2017
  
  Via the EU funds Germany has already payed dozens of Marshall plans to these countries. The point is that these transfers increase instead of decrease the German surplus. Thus, your comment is schizophrenic and hypocritical!
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Paul Daley Jul 21, 2017

Good article. A simple straight-forward analysis, and reasonable suggestions, given the starting point -- half of Germany's foreign assets earning zero return. Fiscal subsidies for investments in Germany and penalties for debt elsewhere are obvious options when interest rates have been neutered.
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Steve Hurst Jul 21, 2017

Vicky

In answer to your point-

Firstly the euro and the eurozone is in principle a German-French construct and members had to apply to join it. That process involved audit and assessment and that appears to have been flawed.The attempt is to blame the applicant not the audit which was the responsibility of the core group. If a bank wants to give out a credit card to all and sundry part of the responsibility for that lies with the bank

Secondly, Mr Sinn is quick to point out what others should be doing alongside making recommendations for German policy -
there is not the remotest sign that Germany will take what can broadly be called corrective action that benefits parties other than Germany.

Thirdly Mr Sinn has previously posted to the effect, as I understand it, that Germany is in receipt of a benefit to the order of 20% to 30% due to the malfunctioning eurozone. This is the root cause of the problem not follow-on policy. I would have to be living in a parallel universe to think Germany would quit the euro anytime soon voluntarily. This is because all the IOU notes from the Med Club held by Germany would become useless and cause a crisis of biblical levels for Germany. Merkel would need divine intervention to cross the Red Sea of Debt and escape the pursuing markets and Soros type speculators

I cannot see any credible argument that German politicians will take steps to negatively impact on German citizens in a scenario where the game can be stretched out to Germany's advantage so that is what will happen.

Whilst the suggestion others need to take steps is entirely justified that is little to do with Germany. What Mr Sinn would be better doing is showing that whilst there is a German surplus that that surplus is insufficient to solve the deficits being created in the Med Club and uplift Africa thus action in those areas is needed by the locals, the problem cannot be solved externally alone.

Quite frankly if Mr Sinn was a singer in a cafe with this lament I would pay him to go away and sing somewhere else because the core issue is the euro and no strategy is presented to deal with that only superficial amelioration. So I am sorry but Mr Sinn is about as useful as an aromatherapist at a major motorway pile up with people lying on the ground with limbs missing. There is one thing I can guarantee and that is the German domestic actions proposed in this article - if they were even implemented -would do nothing in the long term because the euro will just continue eating the Med Club alive. The concept of a common currency without a automatic transfer within it is not sustainable. Equally unsustainable is the idea the German voter will endorse such automatic transfers within the horizon.

Therefore the most likely option is no real action anywhere within the EZ so the situation will not show uptick. All the time the aging demographic will make things more difficult.

Mr Sinn is far more realistic than the recent article on Pro Syn by another author which appeared to read along the lines of we can't help it
- M M Jul 22, 2017
  
  Vicky, from your comments herein, one can only suggest that you perform a reality check and possibly seek some help, as well in the process.
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- Vicky Lavendel Jul 21, 2017
  
  I think that you know very well that you know very well that the EU becoming a real state like the US or UK is not realistic. Thus, my impression is that your only interest in this topic is to play some divide and rule game and because of that it is probably better for me to end this discussion.
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- Steve Hurst Jul 21, 2017
  
  Vicky
  
  It's not up to me to lobby to abandon the euro because I am not even in it, but the euro at some point has to included automatic transfers from rich to poor areas in order to function. This happens in the US so the California you quote contributes to central funds that are then sent out as public spending packages elsewhere. This also happens in the UK. Data is readily available for the UK and the US.
  
  GR opted to stay in the euro because leaving would be currency apocalyptic and a humanitarian crisis would result not least because food and medicines are imports not exports. Yes Germany joined the euro as the bargain to get support for Reunification because the ECB then dropped interest rates to assist - incidentally creating a EU bubble.
  
  The point is that in the euro Germany gains a benefit not experienced by others as laid out by Mr Sinn in his previous article.
  
  With regard to the previous track record of EZ members, that alone should have waved a sea of red flags about the EZ
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- Vicky Lavendel Jul 21, 2017
  
  @Steve: Keeping aside the missing democratic legitimation (no taxation without representation) for a moment a transfer union will rather further increase German surplus (Doesnt California have a big surplus as well?).
  
  If you want to abandon the euro you should rather try to convince the French who have been the ones pressuring the most to introduce it. You shouldnt forget that Greece got a very generous offer in the case of leaving the eurozone (including a big debt relief) by most EU finance ministers, but it refused. Thus, it seems the Club Med still prefers to be in than outside the euro. Blaming Germany for the existence of the euro is quite hypocritical since the introduction of the euro has been a German concession after the reunification. In contrast to countries like Greece, Spain or Portugal, Germany has already done economically very well with its own currency before.
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Vicky Lavendel Jul 21, 2017

Although Mr Sinns undiplomatic but spot on assessment hits the nail again, I can already predict that many commentators wont like his arguments and will try to insult him personally. The profiteers of the current sick financial system we are living in simply dont want to hear the truth, but want to continue with what is not good for them in the long run either like drug addicts!
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