crisis, euro, europeI always hear these two different versions of germans and their relationship with Europe. Some, typically germans, say that erman taxpayers are spending a lot of money to keep everyone else up in Europe. Others say that Germany made a lot of money out of Euro. So I am a bit confused about these two conflicting hypothesis. Could someone explain this to me?
The Germans benefitted from the euro that was significantly weaker than what the DM would have been if they had not joined the EZ.
The German economy profited from the Euro, because with the common currency, Germany’s main competitors (e.g. Italy) could not boost their exports by devaluating their currency any more. As a result, Germany, which was most successful in preventing unit labour costs to rise in the past decades, achieved record export rates, and German export industry made a lot of money.
However, German companies and Banks put the money they made in foreign assets of those countries which got into economic troubles partly due to the Euro and the fact that they could not devaluate anymore. If those countries go bankrupt, German (and other European) banks will lose a lot of money and might collapse.
So far about the benefits and dangers of Euro membersip and the current crisis for German (financial) industry… The viewpoint of the taxpayer adds a layer of complexity. To what degree did the “typical taxpayer” profit from the economic success of Germany, to what degree does he/she suffer from the current crisis?
As a result, to which of the two hypotheses one is more likely to subscribe depends on several factors – whether your industry is export-oriented, whether you are a company owner or a worker whose low wage helped to reach the low unit labour costs in German industry.
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