Two options for German economic policy: Cooperative or non-cooperative with respect to the other euro-zone countries

The German economy is struggling: declining cost competitiveness and market shares; declining corporate profitability, weak exports due to weak global trade. Faced with these difficulties, Germany can opt for one of two strategies: A cooperative strategy, which seeks to inject vigour into domestic demand in the euro zone and pivot its exports back to the euro zone. This strategy would entail a more expansionary fiscal policy in Germany, the formation of a European investment budget, a European industrial policy, and Germany lending its saving surpluses to the other euro-zone countries; A non-cooperative strategy, which seeks to improve Germany’s competitiveness relative to the other European countries, lift its corporate profitability, gain market shares and develop new industries in Germany. This strategy would entail wage moderation, corporate tax cuts and corporate subsidies in Germany. Germany’s choice between these two strategies may depend on the trend in the global economy and in global trade. If global trade regains vigour, Germany may prefer a non-cooperative supply-side policy to improve the competitiveness and profitability of its companies over a cooperative policy to stimulate European growth. In other words, if Germany can sell to China and the United States, why help Italy?