January 8, 2012
Spain, Italy and Greece are taking a knife to public spending because they have no choice. But Germany is still healthy enough that it could do its troubled trading partners a favor and focus more on promoting demand and less on cutting debt.
Could, but almost certainly will not. Even if German lawmakers had not made a balanced budget a constitutional obligation two years ago, there is a deep consensus among policy makers and economists that austerity and growth are not enemies. They are comrades.
Jens Weidmann, president of the Bundesbank, the German central bank, was channeling generations of hawkish predecessors last week when he called on the government of Chancellor Angela Merkel to speed up efforts to cut new borrowing close to zero.
“We must quickly achieve a structurally balanced budget,” Mr. Weidmann said in an interview with the Tagesspiegel newspaper. Germany should set an example for the rest of the beleaguered euro zone, he said.
The Bundesbank president speaks for a large swath of the German public, and his comments suggest that President Nicolas Sarkozy of France and Prime Minister Mario Monti of Italy should not expect more of a financial commitment when they meet with Mrs. Merkel in Berlin this week. Mr. Sarkozy’s visit is Monday and Mr. Monti’s is Wednesday.
“One of the lessons of the crisis,” Mr. Weidmann said, is that cutting budget deficits “should be postponed as little as possible.”
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