Roubini Topic Archive: Germany
This week Ireland became the latest “eurozone peripheral economy” to see its sovereign credit rating downgraded by the credit rating agencies. This follows similar earlier downgrades of Portugal, Spain, and of course Greece. But this downgrading trend is actually good news for the European economy as a whole and truly excellent news for Germany. When money is tight—as it will be in Europe for the foreseeable future—the credit provider (Germany in this case) is strengthened. Its leadership role in Europe is becoming entrenched.
Op-ed in Business Standard June 23, 2010
Of all the major couplings that have gained prominence—Jairam Ramesh’s “Chindia,” Niall Ferguson’s “Chimerica,” and Martin Wolf’s “Chermany”—it is very much the latter that is in the spotlight.
The announcement over the weekend by China to introduce greater exchange rate flexibility is unambiguously good news, provided, of course, that intent is followed up with some actual upward movement of the renminbi. Domestic economic imperatives, and specifically the role of currency appreciation in dampening overheating, have been widely credited as having influenced China’s decision. But there is a mystery here. China’s competitiveness was getting eroded by two sources: domestic wages and prices, which are rising faster than in partner countries, and by the decline of the euro, which—combined with China’s peg to the dollar—was causing the renminbi to rise in trade-weighted terms. So why is China, so wedded to the mercantilist export growth model, changing its policies to further aggravate the decline in competitiveness, especially when the global recovery is still looking shaky?
The $1 trillion rescue of the eurozone, aimed at averting a spread of contagion from Greece, did nothing to help the Greeks address their underlying and unsustainable fiscal situation. Greece is insolvent and needs to lower its total debt burden before 2012.
Angel Ubide argues that Germany should rebalance its growth, allow wages to grow, and encourage domestic demand to help countries like Greece, Spain, Portugal, and Italy.
Edited transcript, recorded March 15, 2010.
by Simon Johnson, Peterson Institute for International Economics and Peter Boone, Effective Intervention
Op-ed in the Wall Street Journal
February 13, 2010
Plutus, the Greek god of wealth, did not have an easy life. As the myth goes, Plutus wanted to grant riches only to the “the just, the wise, the men of ordered life.” Zeus blinded him out of jealousy of mankind (and envy of the good), leaving Plutus to indiscriminately distribute his favors.
Modern-day Greece may be just and wise, but it certainly has not had an ordered life. As a result, the great opportunity and wealth bestowed by European integration has been largely squandered. And lower interest rates over the past decade—brought down to German levels through Greece being allowed, rather generously, into the eurozone—led to little more than further deficits and a dangerous buildup of government debt.
Op-ed submitted to Eurointelligence, August 24, 2009 September 1, 2009 Germany and Japan are heading into parliamentary lower-house elections. In both countries, there is a great deal of dissatisfaction with at least one major incumbent party, according to polling data. Regarding economic policy, there is concern in both countries that entrenched politicians have pandered […]