The news out of Nuremberg, Germany, today that the number of
unemployed Germans unexpectedly rose in April could have big implications for
the rest of Europe Businessweek writes.
Exhibit No. 1 for Germany’s pro-austerity case is the
strength of the German economy. “See,” the Germans’ message goes, “we are
keeping our belts tight and our economy is still strong. Follow our example.”
If Germany weakens, it would have two conflicting effects—hurting the rest of
Europe by decreasing Germany’s demand for their products, but possibly helping
the rest of Europe by making Germany more sympathetic to the need for stimulus
to restore growth.
In truth, Germany hasn’t even embraced the austerity it
urges on other countries, because it hasn’t had to, says Steven Kyle, an
economist at Cornell University’s Dyson School of Applied Economics &
Management. Economic growth has produced enough tax revenue that spending cuts
have not been needed to keep the federal budget in rough balance.
“What will be interesting now will be to see if they will
take the medicine they’ve been urging everyone else to take and cut their own
spending,” says Kyle. “If they do, they will get a contraction….”
No comments:
Post a Comment