Posted by: Ben Vickers on October 25, 2011
Jean-Claude Trichet, in his last scheduled speech as ECB president on Oct. 24, was keen to point out there is a winner in the euro crisis from whom lessons must be learned.
“Since the trough of mid-2009, German real GDP has grown by 6.9% compared with the euro area as a whole by 3.8%. Employment in Germany has increased by 2.1%. Exports have grown by 25.6%. This performance is no accident. Neither is it based on cyclical, unsustainable factors. It is the result of sound fiscal policies, permanent attention to unit labor costs, and bold reforms that have been rigorously implemented over a prolonged period. And it sets an example that is very important for the current situation,” Trichet said.
Given the country’s position in the 1990s, having to absorb the costs of making the former Eastern Germany more competitive after reunification, this result is indeed impressive. And it was indeed no accident. But the benefits of the euro to Germany must not be underestimated. Trichet prodded his audience at Germany’s Humboldt University with a rhetorical question:
“Would the German recovery have been possible without the euro and Germany being in the euro area? Without Germany benefiting from a vast single market of the size of the United States with a highly stable currency?”
The euro zone has allowed Germany to fund its reunification and more.
“The euro has extended the zone of monetary stability to Germany’s main trading partners in the euro area. As more than 40% of Germany’s exports go to other euro area countries, this is very important for German prosperity. The stability of the euro has also helped German companies remain competitive vis-Ã -vis the rest of the world.,” Trichet said.
That may be the one lesson from Germany that other euro members, crucially, won’t be able to replicate: a single market made to measure. In that light, demands from Greece and other nations for help to pay for the spending that in part fueled German growth makes perfect sense.