Destinations Magazine

The German Economy: No New Deal

By Stizzard
The German economy: No new deal

FROM Washington to Athens, politicians and economists who often have little in common all agree that Germany under Chancellor Angela Merkel is largely wrong about economic policy. Germany’s apparent economic strengths—the lowest unemployment in two decades; steady, if low, growth; a balanced federal budget—mask weaknesses and policy errors, they say.A first mistake is to insist that troubled euro-zone countries such as Greece not only make structural reforms to their economies, but simultaneously cut spending and borrowing (depressing demand). But a second is domestic. Given low interest rates, now would be a golden opportunity to borrow and invest more at home, boosting the economy and providing a Keynesian stimulus to the entire sluggish euro zone. Instead, Germany is investing less than in the past and less than most other countries (see chart).

The German economy: No new deal

Raising investment could also deal with another imbalance in the German economy: its…

The Economist: Europe

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