The Euro Crisis and Germany’s Collective Denial of the Truth

Any German blame for the euro crisis is denied, all the others are at fault, and only one country did everything right.


There is no doubt that long lasting external deficits can be harmful to economies. But the same is true for surpluses. Without surpluses, deficits would not exist. If deficits create problems, surpluses create exactly the same problems. Apart from this, the respective size of economies plays an important role. The current account balance as a percentage of GDP of a relatively big country such as Germany, in absolute terms, is significantly bigger than the same percentage of a small country. A German surplus of more than 7 per cent does not lead to 7 per cent deficits in other countries, but to much bigger ones. If, for example, there would be only two countries, Spain and Germany, a German surplus of more than 7 per cent would cause a Spanish deficit of almost 20 per cent.