2016年-PIIE彼得森国际经济研究所_What_Should_Surplus_Germany_Do__20页_288kb

Summary of Policy Brief: What Should Surplus Germany Do?

Core Content

This policy brief addresses the issue of Germany's large current account surplus, which has become a focal point of criticism within the European Union and from the United States. The author, Jacob Funk Kirkegaard, argues that while the surplus is a significant concern, the reasons for reducing it are not as critics suggest, and the solution must be rooted in Germany's own economic interests rather than external pressures.

Main Points

• Germany's Current Account Surplus: Since the 2010 European financial crisis, Germany has maintained an average current account surplus of 6.5% of GDP over the past three years, drawing criticism for allegedly stifling growth in the euro area periphery.
• Criticism and Response: The European Commission warns of macroeconomic imbalances but does not advocate for policy changes. The US Treasury, however, suggests Germany should increase domestic demand, similar to China.
• Germany's Economic Performance: Germany has outperformed most G-7 countries in per capita growth since reunification in 1990 and the introduction of the euro in 1999. It has also maintained high employment and labor participation rates.
• External Balance and NIIP: Germany's net international investment position (NIIP) has increased significantly, reaching over 40% of GDP by 2012, making it one of the largest creditors in the industrialized world. However, this has led to potential financial risks due to valuation losses on its foreign assets.
• Structural Nature of Surplus: The surplus is increasingly structural, driven by the competitiveness of German exports rather than temporary factors. The euro's low exchange rate relative to a hypothetical D-mark further supports this.
• Savings and Investment Trends: Germany's savings rate has remained stable, with household savings at 10–12% of GDP and corporate savings rising after 2003. However, national investments have declined, contributing to the current account surplus.
• Policy Recommendations:
  • Germany should increase public investment to match its advanced economy peers.
  • A minimum of 1% more of GDP in public investment annually is suggested, potentially up to 2% to increase productive capacity.
  • Reforming the "debt brake" constitutional limit on public debt is necessary to enable such investment.
  • Raising wages is not a practical solution due to the decentralized nature of wage bargaining in Germany.
  • Instead, stimulating domestic demand could lead to a positive demand shock and indirectly support wage growth.

Key Information

• Current Account Surplus: Has averaged 6.5% of GDP since 2010.
• NIIP Trends: Germany's NIIP increased to over 40% of GDP by 2012, making it a major creditor in the world.
• Public Investment: Currently at 1.65% of GDP; needs to increase to at least 2.65% annually.
• Domestic Savings: Household savings are stable and resistant to changes in the business cycle or demographics.
• Corporate Savings: Increased significantly after 2003, contributing to the overall savings surplus.
• Investment Levels: National investments have declined, especially after 2000 and 2008, exacerbating the surplus.
• Wage Trends: Unit labor costs (ULCs) in Germany have remained relatively flat since the euro era, with a slight increase after 2008.
• Wage Bargaining System: Germany's decentralized and flexible wage bargaining system makes it difficult to implement wage increases as a policy.
• Inflation and Exchange Rate: Increasing public investment could lead to modest inflation and a rise in the real exchange rate, which would help reduce the external surplus.

Conclusion

Germany's current account surplus is not just an issue for the euro area periphery but also poses significant risks to its own financial stability. Rather than focusing on wage increases, Germany should prioritize increasing public investment to enhance domestic productivity and reduce its reliance on the private sector for intermediating savings. This approach would align with Germany's long-term economic interests and help mitigate the risks associated with its large net international investment position.