Germany has been scolded, even browbeaten, by Obama administration officials, from Treasury Secretary Timothy Geithner on down, for saving too much and spending too little. It has refused to stimulate its economy as the United States has done, on the grounds that the resulting budget deficits would not be sustainable and the policies themselves would not work.And Brits think Americans don't "do" irony.
Administration officials have not been the only ones to warn the Germans about the path they’re on. On the eve of last summer’s G‑20 summit in Toronto, in an interview with the German business paper Handelsblatt, economist and New York Times columnist Paul Krugman said that, while Germany might think its deficits are big, they are peanuts "from an American viewpoint." Germany cannot say it wasn’t warned.
And now the consequences of Germany’s waywardness are clear. Germany’s growth in this year’s second quarter was 2.2 percent on a quarter-to-quarter basis. That means it is growing at almost 9 percent a year. Its unemployment rate has fallen to 7.5 percent, below what it was at the start of the global financial crisis - indeed, the lowest in 18 years. The second-biggest Western economy appears to be handling this deep recession much more effectively than the biggest - and emerging from it much earlier.
30 October 2010
Germany - a well run country
Christopher Caldwell's piece "The Germany that said No" in the latest Weekly Standard has some important insights about why that nation is coming out of the recession so powerfully. The key point is that the German political DNA rejects Keynesianism as leading inevitably to inflation.