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If Germany Were to Leave the Euro, it Would Be Better Off

Sunday, October 7, 2012 22:42
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(Before It's News)

Another week, another conference about the euro. This time it was in Singapore. Nevertheless, it was Germany that was uppermost in my mind, not least because several Singaporeans asked me why Germany doesn’t leave the euro.

by Roger Bootle
Telegraph.co.uk

Last week I gave the political explanation. This week I am going to discuss the economic aspect.

From the formation of the euro in 1999 to now, German unit labour costs have hardly risen.

Since costs have continued rising briskly elsewhere, Germany has gained competitiveness enormously. The result is now a surplus of exports over imports of about 6pc of GDP. It is this surplus – and the associated income and jobs – that defenders of the status quo say would be threatened without the euro.

But there is a catch. Germany has supplied BMWs to southern Europe and they have given it IOUs in return. Will those IOUs ever be honoured? That is the problem with trying to grow through unbalanced trade. In the end, your trade partners need something to pay you with.

Continue Reading at Telegraph.co.uk…



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