Wolfgang Schäuble wants a multi-speed Europe and a buoyant German trade surplus.
Speaking on the sideline of the International Monetary Fund meeting in Washington on Thursday, the German Finance Minister acknowledged that further steps towards European integration are “unrealistic,” but initiatives by “coalitions of the willing” were still possible.
“We need flexible speeds, variable groupings of countries, ‘coalitions of the willing’, whatever you want to call it in a particular situation,” Reuters quotes him as saying.
Apparently, while political integration requires action, trade imbalances require patience.
On Thursday and for the days to come the official German position appears to be that the German trade surplus is a force of nature, beyond anyone’s political control.
Germany has the biggest trade surplus in the world in goods and services, to the tune of €266bn. For goods alone, that amounts to 8,3% of the GDP. That is a problem for the Trump administration, the IMF, the French Presidential candidate Emmanuel Macron, the OECD and just about everyone outside the European Council of Ministers.
Don’t touch my surplus
On Friday, Germany is hosting the G20 Finance Ministers, where he is expected to come face to face with those arguing that Germany is in effect manipulating the Euro to boost its exports, including the United States. Treasury Secretary Steve Mnuchin and the Chief of the US Trade Council, Peter Navarro, are accusing Germany of benefitting from a grossly undervalued Euro.
The OECD also estimates the Euro to be undervalued by 9-to-25%, depending on the methodology one uses.
Speaking at an event of the Carnegie Foundation in Washington on Thursday, Schäuble defended the German trade surplus vis-à-vis the United States noting that “all of us” benefited from “global integration and trade in recent decades,” DW reports.”
It’s not our fault we are great
According to the German public broadcaster, the defense of the German trade surplus has taken the form of a position paper to be distributed to G20 ministers. The argument put forward is that Germany’s trade surplus is not really under its own control. German products are “highly competitive” because they are good, the management of the Euro is “independent,” and exchange rates are set by “the invisible hand” of the market.
Alas, it is a matter of patience. The projection is the trade surplus will be reduced from 8,6% of the GDP in 2015 to 7% in 2018.
Precisely this case was made by Economy Minister Brigitte Zypries. “Our companies produce high-quality machines and equipment that customers abroad like to buy; we do not have to apologize for this,” she told Bild.
Of course, the size of the surplus is admittedly an “imbalance,” although that is not the term Mr. Schäuble is using. Be that as it may, there is nothing anyone can do. Besides, it is the Eurozone’s trade surplus the world that matters, not the German.
Within Europe, the problem of the German trade surplus has been raised by French presidential candidate Emmanuel Macron.
“Germany benefits from the imbalances within the eurozone and achieves very high trade surpluses,” Macron said in an interview published on April 17 with Germany’s Funke Mediengruppe and France’s Ouest-France newspaper. “Those aren’t a good thing either for Germany or for the economy of the euro zone. There should be a rebalancing.”
The criticism, of course, is that instead of increasing salaries and boosting public investment, Germany is affecting income and corporate tax cuts, to the tune of €11bn between 2015 and 2017. Whether these measures increase domestic demand or in fact increase foreign investment is debatable.
According to the German Economy Minister, Brigitte Zypries, Germany has also moved to introduce a national minimum wage and has taken some measures to increase domestic demand and, therefore, imports. The rest is all about market forces.