What Does Germany Need Europe For?

A blog about business and economics.
Dec. 12 2011 8:32 AM

Germany Needs A Strong Europe Less Than Europe Needs A Strong Germany

Hamburg, Germany

Photo by Matthew Yglesias

Heather Rogers, writing for NPR's Planet Money, writes that Germany needs a strong Europe, which is certainly the bien pensant thing to say about the situation. Her key point is that the inauguration of the Eurozone and the tumbling borrowing costs in Southern Europe fed a German export boom. That entire dynamic is now fading away "and now that its customers' economies are falling to pieces, Germany is going to feel the pinch."

That's all completely correct, but what it suggests to me isn't so much that Germany needs a strong Europe as that Germany needs to reconfigure its economy so that households can enjoy a higher level of consumption. As a general matter, configuring the productive side of your economy so that its geared toward creating goods and services that your customers can only buy with money they've borrowed from you is a pretty unwise policy. Germans don't want to make open-ended fiscal transfers to their southern custoers and they say they don't want to keep rolling loans over to them either. The appealing alternative to these strategies would be either for Germany to keep more German-made stuff at home (what if Germany exported less, but everyone drove a somewhat nicer car?) or else for Germans to get more non-German stuff in exchange for all the German stuff they're sending abroad (what if Germany exported as much as it does, but everyone starts using really fancy olive oil?), thus raising actual incomes in Germany's trade partners. Something along these lines -- a lower Value Added Tax, a relaxation of regulatory curbs on retail store hours, less focus on funneling peoples' income into the landesbanken -- seems to me to be the necessary complement to reforms in southern Europe.


It's not that Germans are somehow under a moral obligation to raise their living standards as a favor to their trade partners. It's just that it's a bit absurd for reduced German lending to Spain to cause Germany's output of goods and services to decline. Everyone will be happier in the end if Germans use more of their income to buy things and less of it to make bad loans.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


Sports Nut

Grandmaster Clash

One of the most amazing feats in chess history just happened, and no one noticed.

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

Do the Celebrities Whose Nude Photos Were Stolen Have a Case Against Apple?

The NFL Explains How It Sees “the Role of the Female”

Future Tense

Amazon Is Now a Gadget Company


How to Order Chinese Food

First, stop thinking of it as “Chinese food.”

Scotland Is Inspiring Secessionists Across America

The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant

The XX Factor
Sept. 18 2014 11:40 AM The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant
Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
The World
Sept. 18 2014 1:34 PM Americans Fault Obama for Giving Them Exactly the Anti-ISIS Strategy They Want
Sept. 18 2014 2:18 PM The NFL Is Not a Nonprofit So why does it get to act like one?
Sept. 18 2014 2:00 PM On the Death of My Homophobic Dog I named him Liberace, but I couldn’t have chosen a less appropriate namesake for this coarse, emotionally withholding Norwich terrier.
  Double X
The XX Factor
Sept. 18 2014 12:03 PM The NFL Opines on “the Role of the Female”
  Slate Plus
Behind the Scenes
Sept. 18 2014 1:23 PM “It’s Not Everyday That You Can Beat the World Champion” An exclusive interview with chess grandmaster Fabiano Caruana.
Brow Beat
Sept. 18 2014 2:03 PM Ryan Adams’ New Song Is a Reminder That He’s One of His Generation’s Best Songwriters
Future Tense
Sept. 18 2014 1:24 PM Can the Celebrities Whose Photos Were Stolen Really Sue Apple? It may be harder to prove “harm” than it seems.
  Health & Science
Bad Astronomy
Sept. 18 2014 7:30 AM Red and Green Ghosts Haunt the Stormy Night
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.