German rebalancing is always about to happen but never does: the country’s current account surplus hit a record 7.5 per cent of GDP in 2014. A much lower surplus would be in the interests of Germans and their trade partners alike. Yet the German economy is highly unlikely to rebalance of its own accord: that requires a big public investment programme and higher public sector wages; lower consumption taxes and higher ones on corporate income, wealth and property; steps to encourage greater home ownership, and hence a more equal distribution of wealth and lower household savings; and unequivocal German support for aggressive monetary stimulus by the ECB.
View the press release.
Simon Tilford is deputy director of the Centre for European Reform.