Symmetric adjustment

In connection with the intra-currency growth differentials in the euro area that became conspicuously apparent in the course of the financial crisis following the subprime crisis, a term for the demand that – not only deficit countries reduce their debts, – but also or even mainly surplus countries increase demand for the goods of debtor countries from the euro area by deficit-financed increases in domestic purchasing power. – Contrast this, however, with the fact that, according to detailed calculations in 2012, even a vigorous 10 percent expansion of demand in Germany would improve the current account balance in ClubMed by only about 0.25 percent. Even an increase in wages in surplus countries such as Germany would have virtually no impact at all on deficit countries; and the very idea that comparatively lower wage costs in surplus countries of the euro area will lead to the relocation of production from deficit countries of the euro area is absurd (if only in view of the actual wage cost shares in the total costs of production). Demonstrably, not a single firm from the Pigs has so far relocated the production of goods to Germany only because of the relatively lower labor costs. – Thus, instead of requiring surplus countries to expand government debt, deficit countries should improve the productivity of economic activity primarily through labor market reforms, deregulation of markets and thus promotion of competition, improvement of the tax system, and favoring education and research. – See compensation per capita, labor market flexibility, ClubMed, competitive status, international. – Cf. Monthly Report of the Deutsche Bundesbank in July 2010, p. 28 ff. (a symmetrical adjustment would only bring disadvantages to all parties involved; many overviews and calculations).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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