Home > EMU Crisis, Germany, Global Imbalances > Surprise! I (sort of) Agree with Olli Rehn!
  1. December 1, 2013 at 12:07 pm

    I would like to see evidence that a fiscal expansion in Germany (which I would agree with if it focused on investments) would trigger real benefits for the suffering South. Germany can expand as much as it wants to, it won’t help the Greek economy all that much because the Greek economy does not produce the kind of products which Germany would import. Would Germans buy more cars from France or Italy, or from other places?

    The most immediate action the North could take would be to double vacations in the South. That would immediately reduce Germany’s current account surplus and strengthen the one of Greece. Obviously, that’s only a theoretical argument.

    A somewhat less theoretical argument, which could have short-term effects, too, is that the North should shift its foreign investment from outside the Eurozone to the South of it. Greek living standards have no chance of returning as long as the country does not build up an economic value creation capacity; a stronger productive sector (9 out of 10 businesss start-up’s in Greece are still in the non-productive sector).

    To build up such capacities is way beyond the means of the Greek economy. That requires a credible long-term economic development plan which plan should be largely funded by foreign investments. That way, Germany’s external surpluses would be recycled via investments and private sector foreign investment have a far greater chance to be made wisely than public investments.

    I see only 3 solutions for the Greeke economy: foreign investments, foreign investments and, again, foreign investments. On one hand, they will bring the necessary funding but, much more important than that, they would bring the know-how which Greece needs in all areas of economic activity.

    Obviously, such a strategy can only work if a country like Greece itself welcomes foreign investments and provides the economic framework for it to come.

  1. November 14, 2013 at 1:10 pm
  2. December 6, 2013 at 4:14 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: