The Washington Post

Germany decries U.S. report critical of its economic policy

The United States sharply criticized German economic policy in its bi-annual report on global economic policy, prompting an angry response from Germany. President Barack Obama, left, and German Chancellor Angela Merkel in Berlin earlier this year. (Michael Sohn/AP)

With diplomatic tensions already rising over a U.S. surveillance program that eavesdropped on German leaders, new discord is surfacing over a U.S. report that strongly criticized German economic policy.

German officials on Thursday responded angrily after the U.S. Treasury Department released a closely watched analysis that argued that German policies are hampering Europe’s recovery.

“The criticism is incomprehensible,” the German Federal Ministry of Economics and Technology said in a statement. “Domestic economic forces are a supporting pillar of growth.”

The German statement came after the United States sharply critiqued the country’s economic policy in the “key findings” section of a biannual report on global economic policy, which was released late Wednesday.

The report argued that German economic policies have been excessively tilted toward promoting exports, which puts a burden on weaker European countries to generate economic activity.

Instead, U.S. officials said, Germany should stimulate consumer and business spending.

“Germany’s anemic pace of domestic demand growth and dependence on exports have hampered rebalancing,” the report said, “at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports in order to promote adjustment.”

The result, the report said, was keeping prices and wages low in Europe and globally, which deprives consumers and businesses of the money necessary to generate global economic growth.

While U.S. officials have been saying the same thing for years — subtly in public, more sharply in private — the prominence of the critique raised eyebrows.

In the past, the Treasury report had singled out China with similarly prominent criticism but had noted its concerns about Germany in a more elliptical, less flashy manner.

The new economic tension follows a diplomatic clash between Germany and the United States over U.S. electronic surveillance.

German Chancellor Angela Merkel and other senior German officials have accused the United States of a breach of trust after media reports circulated that the National Security Agency was spying on Merkel’s telephone conversations during broad U.S. surveillance operations.

The U.S. report acknowledged that a growing German economy has helped European economic activity expand overall.

Still, the report said that Germany relies too much on selling products elsewhere in Europe as Germans themselves hold back on spending.

The U.S. report said exports accounted for one-third of Germany’s economic growth in the first half of this year.

The German economic ministry said the exports are a sign of Germany’s “strong competitiveness.”

Zachary A. Goldfarb is policy editor at The Washington Post.
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