6 March 2010 3:43 PM
'Lagarde correct: Germany is crushing Europe'
Yesterday the French finance minister, Christine Lagarde, issued a warning to the Berlin government. She said in an interview with the Financial Times that Germany has to raise its long-stagnant domestic consumption in order to help weaker Eurozone countries boost exports and improve their finances.
Within hours the Germans were dismissing her criticism that their years of keeping wage costs low had raised the competitiveness of Germany industry at the expense of everyone else. They insisted the solution to Euro-sclerosis is for everyone else to be like them.
You could call the argument a draw, except that Charles Dumas of the heavy-hitting Lombard Street Research has just this afternoon released notes which he says show that Lagarde is correct: 'Germany is crushing Europe.' Dumas, as usual, has it right.
'Against US and Spanish growth of 16 percent over the past eight-year cycle,' he writes, 'and British and French 10-11 percent, Germany has only managed 3.5 percent, half-way between sick-man Japan's 6.5 percent and sick-man Italy's half-percent.'
'Such growth as it had required others unwisely to run up debts to pay for its exports. This will happen much less in future, so German growth will be even worse. German domination of Euroland is a disaster.'
'The comic aspect of the attempts by Germany to make the rest of Europe converge on German practice is that the German economic performance has been dismal. What is now being enforced is that nobody else in the Eurozone -- or its irrational aspirant members -- is to be allowed any growth either. Europe is being forced into a German lowest common denominator.'
The fact is that Germany depends for its demand on other people being willing to run up debts. Now the Eurozone policies are making sure nobody can.
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