Sat, Sep 24, 2005 - Page 9 News List

Neo-Conservatives and neo-Liberals, are they finally on the run?

By William Keegan  /  THE OBSERVER , LONDON

Also, the underlying economic position in Germany while certainly not satisfactory, is a lot better than the critics make out. German industry was made hugely uncompetitive first by the terms of the monetary unification of 1990 -- the one to one exchange of marks, and the sharp rises in eastern German wage rates -- and secondly by entering the single currency at an overvalued exchange rate.

But great strides have been made in cutting costs per unit of production and the German economy is becoming much more competitive -- do not forget that it is the world's leading exporter. The problem has been -- and still is -- too much saving and not enough spending. A dearth of what economists call "effective" or "domestic" demand.

So far from requiring "deficit cutting measures" as proposed by Merkel, the situation demands the reverse.

Having voted against neo-liberalism, Germany now needs to re-open the textbooks of John Maynard Keynes and re-learn a few basic economic lessons. One is that you don't get out of a hole by digging deeper.

This story has been viewed 2920 times.
TOP top