If Germany is in trouble economically, can it retain its political leadership of the euro zone?
Until recently, the German economy was out performing the other euro-zone countries, which reinforced Germany ’s political leadership in the euro zone. For example, Germany has been able to impose its latest views on the euro zone’s institutional developments (rejection of a euro-zone budget and coordination of tax, social and labour market policies) on the other countries . But the German economy is going to be in trouble, given: Its declining cost competitiveness and the resulting fall in its market shares; Its significant exposure to sunset industries (cars, chemicals, industrial capital goods); Its rising precautionary savings. So if the German economy is in trouble, can Germany retain its political leadership of the euro zone and continue to impose its views?