Forget Greece: Europe's real problem is Germany

Washington Post
May 21, 2010

Ground zero of Europe's debt-currency-banking crisis isn't in Greece, or Portugal, or Ireland or even Spain. It's in Germany.

So says Martin Wolf, the estimable economics columnist of the Financial Times, who this week offered this wonderfully concise, if somewhat mischievous, description of how the vaunted German economic machine really works:

At one end is a powerful and highly efficient industrial export engine that generates a large trade surplus with the rest of the world, including most other countries in the eurozone. Instead of spending this new export wealth on a higher standard of living, however, parsimonious Germans prefer to save it, handing it over to thinly capitalized German banks that have proved equally efficient in destroying said wealth by investing it in risky securities issued, not coincidentally, by trading partners that need the capital to finance their trade deficits with Germany. To prevent the collapse of those banks, German taxpayers are dragooned into using what remains of their hard-earned savings either to bail out their hapless banks or their profligate trading partners.

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