When it comes to economics, Germany is good - possibly too good for Germany's own good. In fact, Germany's success might be one of its biggest problems, not to mention a problem for Europe and the global economy as a whole.
Confused? Here's what's going on. Whereas other member states of the European Union routinely violate rules limiting their budget deficits to below 3 percent of economic output and total public debt below 60 percent, Germany obeys. It has run a budget surplus for the past five years, including a record 1.7 percent of economic output in 2018. Germany's debt has dropped from 81.8 percent of output in 2010 to 60.9 percent last year. Meanwhile, its export industries flourish, producing huge annual current account surpluses. Germany's $294 billion surplus in 2018 was the world's largest and nearly twice that of runner-up Japan ($173 billion). As a share of Germany's total output, it was a staggering 7.4 percent.
Germans are immensely proud of their fiscal rectitude and their manufacturing prowess, as they should be. Their achievements nevertheless constitute too much of a good thing, because Europe's economy, and the world's, needs new sources of demand. By limiting its own government expenditure and taxing its people stiffly to pay for what it does spend, Germany leaves the role of consuming the world's goods and services up to others, including Americans, who may not be able to play it indefinitely. This harms neighbors, such as Greece and Italy, who need more markets to help grow their way out of debt; and at this point, it is harming Germany, which now stands uncomfortably close to recession because of its undue dependence on global export markets - which are plagued by uncertainty amid President Donald Trump's trade war with China.
Among the many voices calling on Germany to put its balance sheet to work stimulating its economy - tax cuts and infrastructure investment would be especially helpful - are the International Monetary Fund and the European Commission. French President Emmanuel Macron has even said "the German growth model has perhaps run its course," and he has a right to criticize, because his administration has instituted a number of structural reforms to the sluggish French economy that Berlin has long sought. Berlin certainly disdains the hectoring it gets from Trump and his threats of auto tariffs; a good way to shut him up, while stimulating growth, would be to spend more on much-needed defense modernization.
However tentatively, Germany is starting to get the message. Household and government consumption rose modestly last year, part of a trend toward slightly greater reliance on those engines of growth. The country's current account surplus could fall below 7 percent of output by 2020, according to the Bundesbank.
Yet old habits, deep-seated ideological commitments - and the political clout of export industries - die hard. Berlin is on course for another budget surplus this year. Germany needs to move boldly toward growth based more on its own domestic needs. What the world needs now is for Germans be a little more selfish. Actually, it could be the most selfless thing they could possibly do.
The Washington Post