Wall Street Journal
May 11, 2012
Germany's solution to the euro-zone crisis is for other countries to become more like Germany. Or at least more like the way Germany sees itself. For some economists, it's not so much that the advice is wrong, it's that the timing is bad.
The prescription is well-known: Governments should curb their budget deficits and be as fiscally responsible as Germany. Weaker economies must be restructured and labor markets overhauled so as to replicate Germany's economic makeover of a decade ago, which kept wages in check and remade the country into the export powerhouse it is today. Monetary policy across the euro zone, meanwhile, needs to be focused, as Germany's has long been, on keeping inflation in check.
Germany's economic weaknesses are not emphasized. It was Germany (along with France) that rode a coach and horses through the agreement designed to limit budget deficits in the euro zone, and its government debt is still higher as a proportion of economic output than is Spain's. Large swaths of its banking sector are weak; important parts of its services industries are unreconstructed and its retail sector is of another age.
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