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Schäuble: Berlin flattered by French criticism

AFP · 19 Mar 2010, 14:41

Published: 19 Mar 2010 14:41 GMT+01:00

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"Hidden behind the comments from our French friends is praise," Schäuble said in a debate in the German parliament.

"I think that in Europe we should all make an effort to boost competitiveness," he said, while "those who are maybe a little weaker should make more of an effort - not the other way around."

French Finance Minister Christine Lagarde said on Monday that Germany's strong surplus, a result of Germany exporting more goods than it imports, was unsustainable for Germany's partners in the eurozone.

"(Could) those with surpluses do a little something? It takes two to tango," Lagarde told the Financial Times.

"Clearly Germany has done an awfully good job in the last 10 years or so, improving competitiveness, putting very high pressure on its labour costs," she said.

"I'm not sure it is a sustainable model for the long term and for the whole of the group. Clearly we need better convergence."

The European Union's Competition Commissioner, Joaquin Almunia, said in Madrid this week that it was important to pay attention to trade imbalances "and also to countries that have surpluses."

Germany, Europe's biggest economy and the world's number two exporter after China, has also come under attack from the United States in the past over its trade surplus. Critics say that large trade surpluses create imbalances in the global economy, and that Germany should do more to boost domestic demand for imports from other countries, for example through tax cuts.

But there is little room for tax cuts on a scale that would boost spending in a meaningful way, with Chancellor Angela Merkel's coalition struggling with a record budget deficit as a result of stimulus programmes aimed at dragging Germany out of its worst recession since World War II.

The willingness of German trade unions to accept moderate wage increases in recent years has also allowed its exporters, many of them small or medium sized Mittelstand firms, to be more competitive than firms in other


Germans also save more than many fellow Europeans, further depressing domestic spending.

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In a comment column in the Financial Times newspaper, a former director of the European Central Bank, Otmar Issing, also hit back at the tone of remarks by Lagarde and Almunia.

He retorted that pressure on Germany to allow wages to rise in order to help deficit countries was "so economically erroneous and politically dangerous that it would hardly deserve being taken seriously - were it not for the risk that it might actually prevail."

Saying that the idea of European economic government had been revived, with the idea that surplus countries should "do more," he said that the "utopian economics" being advanced were "simply wrong."

Any attempt deliberately to reduce the competitiveness of the highly successful German export model looked like "a bad joke," he said.

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Your comments about this article

18:59 March 19, 2010 by Eagle1
More evidence of why France sucks. Idiots.
19:05 March 19, 2010 by moreanon
Every country in the common market can't have a trade surplus with the others. There are winners and losers - maybe more losers than winners.
23:17 March 19, 2010 by peschvogel
Schauble would rather starve his own people thru deflation than look out for the common good of Europe. This will undoubtingly end ugly in Germany and Greece. In Germany, because they will be forced to bail out Greece and in Greece, Spain & Portugal because those will be the next with cap-in-hand.
23:37 March 19, 2010 by Logic Guy
Well, Greece just announced that they will go to the IMF for assistance, if other EU countries don't bail them out.

Yes, such a thing wouldn't reflect well on the Euro and the EU altogether. But financial assistance from the IMF is perhaps the best thing for everyone.

The EU has benefits. But unfortunately, it never was properly designed, planned and thought out. And to be honest, it is far from being the most intelligent system of government.
12:22 March 20, 2010 by whatzup
Typical of of the French. If they're not doing as well as you, its your fault.
13:43 March 20, 2010 by Eagle1
Germans work. French sip coffee by the Seine and want to be paid for it. This is the result.
17:01 March 20, 2010 by wood artist
There are two ways to level a field.

You can fill in the holes and bring everything up, or you can dig down until everyone is equally lowered.

Personally I prefer the former, and it's time for some of the world to recognize that "dumbing down" is not the way to go.

14:45 March 21, 2010 by Prufrock2010
I can't imagine such close allies as France and Germany being at odds over trade surplus. Where is the love?
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