Yesterday’s news that German exports have hit a record high has triggered another round in the long-running war of words over Berlin’s trade surplus.
It comes as pressure grew on France to push through far-reaching labour market reforms after a surprise downgrade in its credit rating.
Germany exported some €94.7 billion worth of goods in September – up 3.6 per cent year-on-year – and imported €74.3 billion. The resulting trade surplus of €20.4 billion cracked the record of €19.8 billion registered in June 2008.
Exports to the EU rose by 5.4 per cent, one point up on euro area exports, while imports from both blocs dropped.
A week ago Washington resumed its transatlantic spat with Berlin by describing its trade surplus as a problem for euro zone partners. It urged Germany to push domestic demand and boost exports from crisis-hit euro neighbours like Spain and Greece.
The International Monetary Fund has said that a German trade surplus is the only way to rebalance the euro zone, while on Tuesday, EU economic and monetary affairs commissioner Olli Rehn called on Germany's next government to cut taxes and social contributions to boost domestic demand.
EU surplus limit
European Commission officials have indicated they are watching closely to see whether Germany breaches an EU surplus limit of an average of 6 per cent over three years.
In Frankfurt this week, European Commission president José Manuel Barroso suggested, more diplomatically, that it was time for Germany to do its “homework” for euro zone stability.
These regular criticisms of its economic performance are brushed off in Germany, where the domestic media views itself as an “export world champion”.
For German supply-side economic ears, criticism of its trade surplus does not compute as a call to boost German imports. Instead, it is understood as demand to rein in its booming export sector. This is rejected out of hand as counterproductive by Germans, who view their economy as the economic motor of Europe.
Path to competitiveness
Rather than punish its big car and engineering exporters, Germany insists other countries must follow the same path to competitiveness by reducing budget deficits to boost their growth prospects.
ECB president Mario Draghi gave his implicit backing to Berlin on Thursday, saying euro zone imbalances should be overcome without weakening the bloc's strongest economies.
Meanwhile, French president François Hollande's administration came under pressure after Standard & Poor's cut its rating by one notch to AA from AA+, putting France on a par with Belgium and two notches above Italy. – (Additional reporting: Guardian service)
