While Everyone's Focused on China, What About Germany?
Posted by David Shorr
SEOUL-- My nomination for underplayed story of the G-20 is Germany's posture. Embedded in German Chancellor Angela Merkel's stance on the hot-button issues of currency exchange rates and fiscal deficits is a veiled but potentially more significant deflection of -- if not defection from -- one of the G-20's major agenda items.
At the Pittsburgh summit a year ago, the G-20 leaders issued their "framework for strong, sustainable and balanced growth." Vague sounding jargon for a really important issue. The basic idea is that when some major economies are selling things rather than buying, and others are buying rather than selling, the buyers will eventually reach there limit, and the global economy will go haywire. (The Council on Foreign Relations has a good report explaining the issue, but apparently doesn't let you download a PDF.) This is why President Obama talks about the global economy mustn't rely on the American consumer, whose spending accounts for two-thirds of our economy. In the Pittsburgh framework, G-20 leaders acknowledged this problem and pledged to rebalance -- which basically means increasing domestic consumption in the export-oriented economies, the economies that sell a lot and don't buy much. Yet the major struggle for the G-20 has been to move from defining the problem to a framework that nudges countries to start actually rebalancing, and in a few hours we'll see what this summit came up with.
Germany is one of those countries that sells stuff rather than buying. Here's the point about Chancellor Merkel's statements: she talks a lot about Germany's exports as a a success of their competitiveness and not very much about needing Germans to buy more. As with China, Germany is quite happy to chug along with export-led growth, thankyouverymuch. This begs the question -- if Americans become less profligate (and households have already shown they can reduce consumer debt -- then who will pick up consumer demand where we left off?