Tag Archives: wage concessions

Germany’s awkward position in the EMU

Via Marshall Auerback /Social Europe Journal:

Put another way, Germany’s economic performance is tied to external developments because of its reliance on exports. According to Eurostat, exports were equivalent to roughly 52 per cent of Germany’s GDP in 2012. Moreover, Europe is Germany’s largest customer, so the German economy depends on the strength of the European consumer base. According to estimates of the German IFO think tank, if the Eurozone were to break up, and if the five countries that have received aid were to go insolvent, Germany would lose some 530 billion euros. In essence: Germany’s economy relies on the free trade zone and on exports, which the rest of Europe can buy only if it can afford to do so.

And the harsh austerity that has been imposed on the formerly non-competitive Southern nations has led to a dramatic collapse of the prevailing wages in those nations which now means that Germany no longer looks as competitive in trade.  Which probably means that the next stage will be that German industry will demand further wage concessions from its own workers with the implied threat that they will move their manufacturing facilities to other parts of Europe.

This last issue is very easy to monitor. Keeping eyes open. Finnish industry is probably beyond this phase already to some extent (the industries that don’t perform well).