German exports slow down: Should Europe celebrate?

A drawing that shows France’s Emmanuel Macron and Germany’s Angela Merkel driving cars
Many European politicians absurdly insist that the eurozone’s problem is Germany’s large trade surplus (source: GIS)
  • Complaints about German productivity and savings have rightly been falling on deaf ears in Berlin
  • German products are competitive, and this explains the country’s strong export performance
  • Europeans had better worry about the future of German exports, which seem to have come under pressure

Blaming the Germans for their strong export performance has been a popular sport for years. According to the standard argument, a significant trade surplus signals that Germans save too much and, as a result, their domestic demand is relatively weak. If Germans consumed more, the reasoning goes, their imports from Europe would increase and benefit economic performance on the rest of the continent. This line of thought is flawed for a variety of reasons.

The details are beyond the purpose of this report, but one point should suffice. Higher savings translate into greater investments, not lower demand. This is exactly what characterizes the German economy. Companies in the European Union can only blame themselves if they are not able to attract German funds, or if German customers cannot find in the EU area what they need and would be willing to buy.

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