The German Current Account Surplus – Holding Captive the German and Global Economies
- Pages: 31
- Published: September 2017
- Report Code: ML00024-045
The size of Germany's current account surplus is an economic phenomenon as the forces behind it go beyond the simple competiveness of German exports. Indeed, the widening gap between domestic savings and investment is the determinant of this trade surplus, which is shaped by the actors of the German economy; namely firms, the government and households. Furthermore, the harmful impact of this trade surplus reaches across the domestic economy – where it is a source of rising inequality and limited social welfare – to the global stage, where it acts as a means of destabilizing the economies of countries that accumulate unsustainable debt through trade deficits.
Key Questions Answered
– How and why has the German current account surplus reached enormous levels?
– Why is the German current account surplus destabilizing for the global economy?
– Is the German exporting growth model beneficial for the domestic economy?
Scope
The German exporting model has been based on the depreciation of German labor, as that is reflected by industrial relations and labor reforms. Simultaneously, the propensity of German households to save has led to subdued domestic consumption, reinforcing the exporting model. Furthermore, the attachment of the German government to fiscal surpluses has further enhanced this trend.
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