EU puts Germany in the dock over export success

13th November 2013, Comments 0 comments

The European Commission put Germany in the dock Wednesday, saying its runaway export success may harm a fragile EU economic recovery and does little to cut soaring unemployment.

The move is unprecedented against the bloc's most powerful member state whose track record for growth and financial stability sets the benchmarks.

But success comes at a price, with Germany seen as overly relying on overseas exports for growth at the expense of increasing domestic demand which would benefit its eurozone and EU partners more.

The EU executive said that with nearly 27 million out of work in its 28 member states, Germany should consider whether a change of tack would do more for its EU neighbours.

"The issue is whether Germany ... could do more to help rebalance the European economy," Commission President Jose Manuel Barroso said.

"The biggest problem in Europe is unemployment," Barroso said, describing it as "an enormous challenge".

A Commission report found that Germany and 15 other member states -- including France and non-euro Britain -- had "imbalances" on a range of indicators from debt to trade which need attention before they become serious problems.

Struggling France, faced with very slow growth, high debt and a high tax regime was put on notice with Italy and Hungary to take "decisive policy action" between now and May, when the findings will be reviewed.

The Commission found them at fault in areas ranging from debt to pensions planning.

Commission 'not taking on role of governments'

Mindful of the sensitivity of taking member states to task over economic policy, Barroso insisted "it is is not about the EU running economies in place of national governments."

Rather it is about opening a new phase of "bolder" cross-border action to produce growth and jobs, "ensuring that what is good for individual states is good also for the EU."

The timing may go down badly in Berlin where Chancellor Angela Merkel is locked in difficult negotiations with her Social Democrat opponents on drawing up a coalition government following September polls.

The Social Democrats are pressing precisely for measures such as a minimum wage which Brussels -- but definitely not Merkel -- believes is necessary to boost German domestic demand to the benefit of all.

The figures show Germany chalked up another record trade surplus at a seasonally-adjusted 18.9 billion euros in September.

Germany has also had a trade surplus equal to 6.5 percent of Gross Domestic Product in the 2010-12 period, well above the 6.0 percent EU ceiling requiring notification and remedy.

With European Parliament elections also looming large in May next year, the EU's Economic Affairs and Euro Commissioner Olli Rehn stressed that the new push was not about "criticising" Germany's success.

Rather it "will provide a valuable contribution to debate on economic policy and reforms in Germany" which ultimately, in boosting domestic demand, could benefit all, he said.

"We should like to have more Germanys in Europe," Barroso said, adding that the move was completely in keeping with new rules adopted during the debt crisis to promote much tighter economic policy coordination.

Thirteen countries were put on the blacklist last year, among them Belgium, Britain, Bulgaria, Denmark, Finland, France, Hungary, Italy, Malta, The Netherlands and Sweden for a variety of lesser failings.

Spain and Slovenia were singled out as having more serious problems requiring urgent attention.

On Wednesday, as well as Germany, the Commission added Luxembourg and Croatia to those countries now subject to closer scrutiny in Brussels.

For France, the key task is to make public spending more efficient and simplify business conditions, Rehn said, with labour market and pension system reforms already identified as key to reducing social tensions.

Germany has come under fire from countries in trouble during the debt crisis for demanding too much austerity in return for its financial help.

At the same time, its reliance for growth on imports riled its weaker neighbours and fuelled an upsurge in recent criticism -- including from Washington -- that it does not do enough to help the European and global economy.

Berlin has consistently rejected that argument, saying everyone gets to share in its success and change would do little good in any case.

Even if Berlin cut taxes so as to boost domestic demand, "the positive spill-over effects would be minimal," said Jens Weidmann, head of the German central bank or Bundesbank.

The real issue is for other EU partners to make their economies more competitive by adopting the painful labour and other reforms Germany has pushed through, he said.

© 2013 AFP

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