Germany’s fiscal policy is irrational, even from its own viewpoint

The other European countries complain about Germany's restrictive fiscal policy, since it weakens domestic demand in the euro zone. But Germany’s fiscal policy is irrational, even from its own viewpoint: Because Germany’s private sector has a high savings rate, it leads to a huge overall savings glut in Germany, resulting in a huge accumulation of external assets. But the return on these external assets is low, and certainly lower than that on private or public investments in Germany; The rapid reduction in Germany’s public debt ratio is leading to excess demand for German government bonds, leading to an extremely low equilibrium long-term interest rate. This very low long-term interest rate is a serious problem in an ageing country with a high savings rate. Germany believes it is getting richer by reducing its public debt ratio: in reality, it is getting poorer due to the low return on its external assets and the zero return on its domestic savings.