Saturday, May 11, 2013

Dirk Ehnts — On the imposition of the German export-led growth model on the eurozone

So, where does it leave the world? Will perhaps China be turning into a net importer vis-a-vis the euro zone? Will it be Eastern Europe? The US quite certainly won’t have it, since they just had a real estate bubble. Politically, we are back in mercantilist times where nations compete for markets and international cooperation takes a back seat. In order to become competitive, you could either increase productivity or cut wages. 
Obviously, since government spending is cut, the euro zone opts for the second alternative. This means that purchasing power of households who depend on income from wages (and not interest from invested capital) will fall. Instead, a bigger part of production will be exported in exchange for foreign assets that might be defaulted upon by those that emitted them (think of Iceland). In how far that is to promote peace and prosperity in the European Union or elsewhere I have no idea.
econoblog 101
On the imposition of the German export-led growth model on the eurozone
Dirk Ehnts | Berlin School for Economics and Law

1 comment:

Ryan Harris said...
This comment has been removed by the author.