June 25, 2011
To better understand Germans' unease over subsidizing their southern neighbors, consider Berliner Niko Strogies.
The 28-year-old mathematician has never taken out a loan, rarely uses his credit card, and saves about 10% of his paycheck every month. He recently bought a car with cash. "I've never bought anything without having the money for it," Mr. Strogies says. His behavior, multiplied across the population of Germany, Europe's biggest economy, helps explain the economic imbalances that have fed the euro zone's crisis.
For years, German consumers' reluctance to splurge has left German companies reliant on exports for growth. Other euro-zone economies, meanwhile, have had to live with sluggish exports to Germany, with its large economy. At the same time, the strong euro has made products from the peripheral countries less competitive outside the euro zone. On top of this, the weaker countries' low savings rates are forcing a reliance on foreign investors to finance their deficits.
Now, frugal German taxpayers like Mr. Strogies are on the hook for bailing out some other European countries where borrowing has been a way of life. It's one of the issues fueling tensions within the euro zone as Germany and France this week began the delicate task of trying to convince their major banks to voluntarily accept losses on their holdings of debt in Greece, which faces a cash crunch despite a bailout last year.
More
No comments:
Post a Comment