After publication of the European Commission's in-depth analysis "Macroeconomic Imbalances in Germany 2014", German Minister for Economy and Energy, Sigmar Gabriel, said: "The Federal Government supports the European Commission in the consistent implementation of all procedures concerning the coordination of economic and financial policy in the European Union. However, it is important to note that the competitiveness and strong export figures of German companies are a cornerstone for the whole European economy. Germany can be proud of its industrial strength and its exports. Our goal is to keep the industrial base competitive and expand it, both at national and at EU level. At the same time we want to stimulate public and private investment. With the measures agreed in the coalition agreement we will boost government investment and strengthen the domestic forces of growth and thus contribute to reducing disparities.
The Federal Government will examine the Commission's analysis results in detail and comment on them in April as part of the National Reform Programme. Together with its European partners, the Federal Government is committed to reduce economic imbalances in compliance with the requirements of the reformed Stability and Growth Pact.
Full press release (in German)
Detailed statement by the BMWi (in German), 4.3.14
The Commission had the following to say on Germany:
The trade surplus of Germany vis-à-vis the rest of the world has increased, while it has decreased with the rest of the euro area. The latter is a favourable development, but which needs to be put in perspective: the change vis-à-vis the euro area owes more to a reduction in imports by the euro area periphery than an increase in German imports. Moreover, part of the reduction in the intra-euro area surplus has to do with other 'surplus countries.' An increase in domestic demand through an acceleration of investment, would reduce the surplus, boost potential growth, and could contribute to the recovery and to the ongoing adjustment in the euro area.
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Germany is experiencing macroeconomic imbalances, which require monitoring and policy action. In particular, the current account has persistently recorded a very high surplus, which reflects strong competitiveness while a large amount of savings were invested abroad. It is also a sign that domestic growth has remained subdued and economic resources may not have been allocated efficiently. Although the current account surpluses do not raise risks similar to large deficits, the size and persistence of the current account surplus in Germany deserve close attention. The need for action so as to reduce the risk of adverse effects on the functioning of the domestic economy and of the euro area is particularly important given the size of the German economy.
More specifically, relatively low private and public sector investment together with subdued private consumption over a longer period contributed to modest growth, falling trend growth, increased dependence of the economy on external demand and the build-up of the external surplus. The challenge is, therefore, to identify and implement measures that help strengthen domestic demand and the economy's growth potential. Higher investment in physical and human capital, and promoting efficiency gains in all sectors of the economy, including by unleashing the growth potential of the services sector, which would also contribute to further strengthening of labour supply, are central policy challenges.
In his comments at the press conference on the winter economic governance package, Commission Vice-President Olli Rehn stated: "In Germany, the persistently high current account surplus is a sign of strong external economic competitiveness, which is positive but also implies that a large share of Germany's income is being invested abroad. In turn, domestically, both private and public investment has been low for a long time. This poses a risk to the economy's long-term growth potential. Therefore higher investment in physical and human capital and opening up the economy to more competition, particularly in the services sector, would support future growth in Germany, and to some extent also elsewhere in Europe."
Full speech
Sven Giegold, economic and financial policy spokesman of the Greens in the European Parliament commented: "Now it is the Federal Government's turn to act: instead of being after even more export surpluses like an alcoholic after more whisky, now sober correction work is necessary. The Commission's analysis should therefore be seen in Germany as an important contribution to the stabilisation of its own foreign assets and that of the eurozone. German citizens and companies should invest their money domestically for a sustainable lifestyle and an ecological future, rather than put it at risk abroad by handing it over to banks and insurance companies.
Excessive current account surpluses not only reduce the investment and consumption opportunities and consequently the standard of living of the people in Germany; they are also associated with high risk of loss for citizens and businesses of the export-orientated Member State. A rebalancing of these imbalances is in the interest of all, for it would not only stabilise the eurozone but also protect against asset loss."
Full press release (in German)
See also: CER/Tilford article: The eurozone's ruinous embrace of 'competitive devaluation', 10.3.14
© BMWi - Federal Ministry of Economics and Technology
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