The familiar view of Germany’s role in the euro crisis is simple enough: Germany has been the principal beneficiary of the euro, and for this reason ought to show solidarity with those euro-zone members in crisis. Once the euro zone is back on its feet, Germany will be the main beneficiary again.
Unfortunately, this view does not appear to fit the facts. Those who think that Germany has been a winner with the euro almost always rest their case on Germany’s export surpluses. The euro created stability; it eliminated exchange rate risks; appreciated less than the Deutsch mark would have, and thus aided German exports.
But has the euro benefited Germany more than other countries?
It is true that between 1998 (the year in which the European Monetary Union was effectively introduced, although euro currencies and bills were not introduced until 2000) and 2011, German exports grew by 117 percent, according to the Federal Statistical Office. But if the euro was so vital to Germany’s external trade, then the increase in exports to euro zone members would have been greater than the increase to other countries. In fact, the reverse is the case.
According to my calculations, based upon the federal statistics, German exports rose most — by 154 percent — to the rest of the world; by 116 percent to non-euro E.U. members; and least of all, 89 percent, to other euro zone members. In 1998 the euro zone still accounted for 45 percent of all German exports; in 2011 that share had declined to 39 percent.
These trends are continuing. The euro zone remains very important to Germany’s export trade, but it is hardly the motor of growth.
Between 1995 and 2008, Germany saved more than most, yet it exhibited the lowest net investment rate of all O.E.C.D. countries. On average, from 1995 to 2008, 76 percent of aggregate German savings (private, governmental and corporate) were invested abroad.
As Hans-Werner Sinn of the Ifo Institute has demonstrated, Germany bled capital in the years before the euro crisis — capital that fueled an unprecedented economic boom in the southern euro zone that spread out from their real-estate markets to the general economy. German capital exports to the Anglo-Saxon countries and France also rose markedly up to about 2008.
Between 1995 (the year when the details for monetary union were finalized and the single currency effectively launched) and 2011, Germany had the second-lowest growth rate in G.D.P. among all European countries, according to Eurostat. It might be argued that in the mid-1990s, Germany was experiencing the immediate and most severe aftershocks of reunification.
However, growth was equally below the European/E.U. average for the period 1998 to 2011: Germany grew at the average annual rate of 1.4 percent, compared to 1.7 percent for France, 2 percent for the Netherlands and 1.6 percent for the euro zone as a whole.
The performance of the German economy seems even less impressive in the wider European and trans-Atlantic context. During the period referred to above, Sweden grew by 2.8 percent, Britain by 2.1 percent, and the E.U. as whole by 1.8 percent. Germany also lagged significantly behind the United States, which grew at an annualized 2.2 percent. Over the period from 1998 to 2011, only Japan, Italy, Portugal and Greece performed worse than Germany. This is not the performance of a euro-winner.
Germany’s relative economic performance within the euro zone only began to improve in 2006. Nonetheless, its G.D.P growth rate between 2006 and 2011 remained below that of Sweden and Austria, and broadly in line with the Netherlands, Finland and the United States.
During the first decade of the euro, again according to Eurostat, German unemployment tended to be higher, at times markedly higher, than the euro zone average. It then began to decline to levels well below the euro zone average, although it is rarely noted that it remains significantly higher than the unemployment rate in Austria, the Netherlands, Switzerland and Japan.
Finally, German wages and living standards did not rise for a decade and a half from the mid-1990s, in sharp contrast with Southern Europe, Britain, and indeed most of the world except Japan.
Perhaps most importantly of all, at 82 percent of G.D.P., Germany’s public debt is higher than that of most euro zone countries, although it is slightly lower than France’s debt and significantly lower than Portugal, Italy, Ireland and Greece.
However, except for small adjustments, Germany’s guarantees and loans to governments and banks in the euro zone have not been accounted for as losses. Similarly, no account has been taken of Germany’s potential losses and liabilities. According to Sinn, Germany’s total exposure currently amounts to over €700 billion, or about one third of Germany total public debt of around €2.09 trillion. If and when Germany’s losses have to be realized, Germany’s aggregate public debt could quickly approach Portuguese or Italian levels and, in a worse-case scenario, rise well in excess of 110 percent of G.D.P.
The euro, it seems, bled Germany of capital which then fueled growth in southern Europe until 2008. Until then Germany performed worse than any other country in the euro zone and the E.U. From 2008, it began to perform better, but for the last 15 years Germany has been one of the worst performing economies in northern and central Europe. Germany was the loser, not the winner of the euro.
Since 2006, Germany has benefited, relatively, from the loss of confidence in southern Europe; non-European demand for German goods, and moderately rising internal demand. Those benefits, however, are precarious, and will quickly be eroded and reversed by escalating payments to the PIIGS (Portugal, Italy, Ireland, Greece and Spain) countries, with potentially dramatic knock-on effects for public finances, and internal and external demand.
Germany’s recent relative gains will soon be forgotten as the country is asked to pay the bill for a boom it never had — a bill it may not be able to pay.
Gunnar Beck is a professor of E.U. law at the School of Oriental and Asian Studies, University of London, and a former legal adviser to the European Scrutiny Committee of the House of Commons.
Enlace permanente