Surmounting the German Surplus by Fabrizio Coricelli - Project Syndicate

Surmounting the German Surplus by Fabrizio Coricelli - Project Syndicate



...In recent decades, says Sinn, the US financial industry has offered “international investors a potpourri of alluring products” that have pushed up the value of the dollar relative to the euro, making it harder for US manufacturers to compete. Or, as Wyplosz observes, “it takes two to tango. For every risky borrower, there is a careless lender ready to dip and twirl.”...



... “The introduction of the euro,” Sinn writes, “dramatically improved the creditworthiness of southern European countries.” But it also created a false “sense of security,” which allowed for capital – much of it from Germany – to flood into southern Europe. That capital sustained a deficit-fueled economic boom in those countries prior to 2008; and now that it has disappeared, so have those countries’ current-account deficits...



...n fact, according to Gros, “All northern European countries with a Germanic language are running a current-account surplus,” including the Netherlands, Switzerland, Sweden, and Norway, each of whose surpluses, relative to GDP, exceeded that of Germany at the time.