The Nov. 2 editorial “Austerity is hurting Germany, too” reflected some common misconceptions about the German economy. In recent years, German gross domestic product growth has been driven, above all, by the domestic economy, not foreign trade. Germany is not only the world’s third-largest exporter but also, simultaneously, its third-largest importer. In particular, its imports from European Union and euro zone countries have risen significantly in recent years.
This year and next year, imports will rise significantly more than exports, and the German government’s fall projections show that in 2013 and 2014, growth in Germany will be driven primarily by domestic consumption and investment. Since the global financial and economic crisis, Germany has been the engine of growth and anchor of stability in the euro area, where the recession would have been much worse without Germany’s growth. At the same time, the German government has shown substantial financial solidarity by helping neighbors who lost access to the financial markets.
There is widespread consensus in Germany that wealth is created by making the economy more productive, not by taking on spiraling debt. I am aware that economists are split among those who see such supply-side reforms as key to economic growth and those who believe in stimulus of demand. The truth may lie in a combination of the two, but supply-side reform is always more cumbersome to implement politically than simply taking on more debt.
There is no government-controlled export model. Imbalances in the euro zone have been receding. Domestic consumption and investment in Germany are growing. We are heading in the right direction. Curtailing competitiveness of German companies in order to reduce German exports, however, would make everybody, including our partners, poorer.
Peter Ammon, Washington
The writer is Germany’s ambassador to the United States.