Project Syndicate
February 24, 2012
Germany’s position in Europe looks increasingly peculiar and vulnerable. In the chaos of German unification in 1990, when Germany’s neighbors were terrified of the new giant, then-Chancellor Helmut Kohl promised a European Germany, not a German Europe. Today, however, the terms of any European rescue effort are obviously set by Germany.
There is widespread recognition that Europe needs substantial economic growth if it is to emerge from its debt woes. But German concerns about stability – founded on its catastrophic interwar experience – push in the opposite direction. As a consequence, Germany-bashing is now in fashion.
Germany’s critics make two points: the real European problem is the German current-account surplus, and Germans are perversely obsessed with their past.
The German current-account position is in fact a long-standing issue that predates the monetary union. By the 1960’s, Germany had emerged as the strongest and most dynamic European economy, owing to robust export performance. German current-account surpluses, driven primarily by positive trade balances, appeared briefly in the 1950’s, were corrected after a currency revaluation in 1961, and then re-emerged in surges in the late 1960’s, the late 1970’s, the late 1980’s, and again in the 2000’s.
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