Report
Patrick Artus

What are the limits to Germany's non-cooperative choices?

Germany's non-cooperative choices with respect to other euro-zone countries are well known: Refusal to reduce Germany's external surplus through a more dynamic demand-side policy; Refusal to lend Germany's savings surplus to other euro-zone countries, as this surplus is being lent to the rest of the world outside the euro zone, in particular to the United States; Very great reluctance to mutualise euro-zone countries debts, and rejection of mutualisation that would lead to transfer payments from one country to another; Rejection of ECB interventions aimed at facilitating financing of governments through the monetisation of government bonds. Will Germany's resolutely non-cooperative choices come up against obstacles that would force Germany to cooperate? If Germany makes these non-cooperative choices, it will be confronted with: Persistently weak growth in the other euro-zone countries; Diverging situations in the euro-zone countries that could lead to a political crisis and a risk of a break-up of the euro; A widening of the peripheral countries' yield spreads and a debt crisis in these countries. The announcement by Angela Merkel and Emmanuel Macron of a proposed EUR 500 billion Europe-wide plan shows that Germany seems prepared to make cooperative choices with respect to the rest of the euro zone.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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