Wednesday 26 February 2014

PS on Germany

'The myth of German austerity' is the title of a recent post on Paul Krugman's blog. He's making an important point about public spending: Germans were far less austere than most other European nations. In this sense the German case confirms what critics of austerity have argued all along: less public spending cuts=higher growth.

However, it needs to be added that Germans experienced substantial economic harshness ('austerity') because of stagnating real wages.

But neither the fake austerity in public spending nor the real abstinence of wage earners are at the root of Germany's slightly better economic performance. This is caused by significant export surpluses which are problematic for a number of reasons outlined in previous posts.

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