The US government and the European Commission (EC)
recently slammed Germany for running large current account surpluses. Paul
Krugman jumped in with this beauty of a quote:
The
problem is that Germany has continued to maintain highly competitive labor
costs and run huge surpluses since the bubble burst — and that in a depressed
world economy, this makes Germany a significant part of the problem.
Only in today’s surreal world of economic policy could
being highly competitive be deemed detrimental. This criticism of Germany is
not new, but we are no longer living in the 1950s. Germany does not have its
own currency, and there is little that is “German” in a German export....... For
reasons that are hard to understand, the European Commission has a rule that it
must intervene if a member country has a current account surplus over 6 percent
of output over a three year period. Germany’s was 7 percent last year,........If
the free exchange of goods and services and free movement of capital leads
to......greater surplus, where is the problem? Why does this rule even exist?
Why would the EC impose a constraint that limits the movement of goods and
services or capital? Wasn’t the EU created to foster the elimination of
unjustifiable constraints? The EU should not be surprised that countries want
to leave when it imposes such illogical rules.........To Read More....
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