Dec 16, 2011

The Flip Side of Germany's European Bailouts

Among all the political noise coming out of Europe the main theme seems to be that Germany may have to bail everyone else out and is not too happy about that. While factually true, we should not forget that Germany has been the main beneficiary of the currency union. The estimates of how much stronger the Deutschemark would have been compared to the Euro if it still existed vary between 50% and 100% depending on who is running the models. Either way that would have been terrible news for Germany's economy, which is very dependent on export of capital goods - just take a look at Japan. So given that it has been enjoying all the benefits, Berlin should be more willing to spread the love. In fact it has to do that, or risk an end to its export-lead boom if Europe ever reverts to local currencies.

No comments:

Post a Comment