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France to Germany: “We stink.”

You gotta love this EU infighting. Der Spiegel is reporting today that

French Finance Minister Christine Lagarde urged Germany on Monday to boost domestic demand and said Germany’s large trade surplus was endangering the competitiveness of other euro zone economies.

… “Clearly Germany has done an awfully good job in the last 10 years or so, improving competitiveness, putting very high pressure on its labor costs,” Lagarde said. “When you look at unit labor costs in Germany, they have done a tremendous job in that respect. 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.”

… She indirectly criticized Germany’s export strength, saying: “You can’t ask one player, as big as it is, to pull the whole group. But clearly there needs to be a sense of common destiny that we have together with our partners.”

Wow, are there a bunch of knee-slappers here. What she’s saying is, “Hey, everyone but Germany is lazy and makes too much money. Yeah, it’s probably not fair for them to carry the rest of us but c’mon, you’re making us look bad!”

The notion that because Germans are working hard and pumping out products the world wants they should slow down is preposterous of course; this is basic “make hay while the sun shines.” But the fundamental point in the first paragraph is more subtle and also dead wrong. That Germany’s profit, its surplus, makes other economies somehow uncompetitive is ludicrous. This comes from classic liberal fixed-economic-pie thinking. This is like saying my neighbor’s successful diet keeps me fat. The ‘euro zone’ will always have these problems, as these folks see the problems, because history shows that political union must exist so you can eventually have financial union. They’re suffering from the problems caused by putting the cart in front of the horse. I also imagine Dr. Thomas Sowell would point out, beyond the economic fallacies in this mind set, there’s also a cultural dimension. You’re never going to get the Germans to be as lazy as the rest of Europe appears to be, at least as measured by the size of Germany’s profit in world markets. It’s just not in their cultural make up.

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