No, this is completely in line with everything that the EU is all about. I'm not sure where you got the belief that Euro countries are not allowed to have internal trade deficits, it's inevitable in fact.

Merkel said after 2008 that ALL countries in the EU must have surpluses. It was like saying all teams in the NBA must win.

The world is a lot larger than the EU so there is no reason why that could not be the case.

I rememember in an econ book that we think that exports have the "world" to serve. But in reality most countries trade the most with those closest to them. I wouldn't be surprised if that was the case for the majority of EU countries

Yes, but don't underestimate the exports that Germany is generating, between all of the high tech there and the car companies you are looking at a substantial exporter.

China is #1, the USA (all of it) is #2 and Germany (just Germany, not the EU) is #3. Have a look at their relative populations and appreciate that fully.

Asia is exporting too (Japan, China, Korea). Australia is exporting. The only ones not exporting, i.e. importing is Africa and South America and eastern Europe including Russia if you ignore their oil exports.

My guess is that Germany still has a surplus against other euro countries, instead the money is flowing to oil and gas exporting countries. So that wouldn't help.

Yes, and thus at some level, is unsustainable. ie, There is a point at which they could be running all the surplus they could wish for against the rest of the EU, but the cost of those surpluses offsets any gains to economic growth.

> but the cost of those surpluses offsets any gains to economic growth.

In the export destinations like Greece. For Germans it means supressed wages because they have to compete against Greek wages which means Germany has to sacrifice its productivity gains to provide low priced goods, effectively giving those productivity gains away for free the moment the export destination country predictably must go bankrupt.

This is the first time I've heard about this, could you tell me what treaties they're violating?

Barring an economy from running a surplus seems like a terrible trade deal to me, so I wonder why the Germans would ever agree to such a rule.

Because you are not allowed to beggar-thy-neigbour in a common currency area.

If Germans are allowed to have a permament surplus, than someone MUST always have a deficit.

Why? Materials get imported from outside the EU all the time and exports can also go across EU borders. It's not like Americans pay their BMWs with euros.

No country has a trade surplus/deficit of exactly 0, or even near 0. There's always at least half a billion going either way. If you know of any treaties that put limits on these numbers, I'd like to know what they are because I'm very curious about the intentions behind the people who would draft something like that.

Going by https://trade.ec.europa.eu/doclib/docs/2013/december/tradoc_... (link says 2013, but document says Q1 2022), Germany had an intra-EU trade surplus of about 0.2 billion euros. Germany is the closest to a perfect balance within the eurozone in the entire EU except for Bulgaria. Their surplus is almost entirely extra-EU, which isn't a problem for EU members.

>It's not like Americans pay their BMWs with euros.

The Greeks do hence they are massively in debt. No, they can't export their way out of debt because that would mean Germany has to export less and import more. Germany is supposed to be the workplace country and Greece must remain soulless suburbia with no job opportunities.

The Greeks are in massive debt because of years of financial mismanagement and fraud, as well as cooking their books to get into the EU to make their economy look more stable than it really was.

Greece can export to any country it wishes, if it has goods or resources that other countries want. If Greece can produce the Germans really want, they'll export to Germany all the way to an internal German trade deficit.

The entire EU would be quite happy if Greece turned into a workers' paradise tomorrow, but no other country is going to pay to fix the mess corrupt Greek governments have left behind unless the Greek situation threatens the stability of their own economies.

That's an extremely naive thing to say. Do you think the root cause of this does not apply to other European countries? Namely, faltering supply chains in Asia, skyrocketing energy prices?

Can you explain this in more depth? I'm not that familiar with EU laws and treaties. Is it illegal to run a trade surplus? How does that work, functionally?

Yes, there is a maximum allowed limit in the Maastricht treaty. Germany has been systematically breaking the rules.

https://www.intereconomics.eu/contents/year/2018/number/3/ar...

"The rules established under the EU’s macroeconomic imbalance procedure (MIP)define a ceiling for current account surpluses of six per cent of GDP and stipulate that the three-year average for a country’s current account surplus should not exceed this ceiling.2 However, Germany has been running surpluses in excess of this figure for many years. Its most recent three-year average is eight per cent of GDP, while the 2016 figure was even higher, at 8.5%."

I don’t think it is illegal but it was hurtful to the EU overall:

https://archive.nytimes.com/krugman.blogs.nytimes.com/2010/0...

Of course, you could make the argument that it violated the spirit of the treaties.

What specific harm is being done here though? Krugman has a tendency to take a lot of underlying assumptions for granted without actually enumerating them. I’m looking to understand why Germany should have to manage its economy based on the aims of the rest of the EU and not their own, which seems to be what’s implied here.

“* I’m looking to understand why Germany should have to manage its economy based on the aims of the rest of the EU and not their own*”

Because Germany has renounced part of its independence and sovereignty by joining the EU, so now it has to do the patriotic thing and think of that larger collective. As a point of comparison, should New York do what is best for New York, or what is best for the country? At least sometimes, we expect New York to sacrifice its own interests and do the patriotic thing for the whole country. As was pointed out many times during the crisis years of 2008-2013, many of the problems in the EU exist because of its partial and unfinished integration. It is very difficult to have a unified currency without also having a unified fiscal policy. As others have pointed out, the EU cannot survive in its current state, either it breaks up or it deepens its integration and becomes a United States of Europe.

>Because Germany has renounced part of its independence and sovereignty by joining the EU, so now it has to do the patriotic thing and think of that larger collective.

Is this enumerated in a treaty? Which law says this?

>As a point of comparison, should New York do what is best for New York, or what is best for the country? At least sometimes, we expect New York to sacrifice its own interests and do the patriotic thing for the whole country.

I live in the United States and I have never, ever, heard of this question being asked. Which thing is New York sacrificing for the rest of the United States?

Yes, there is a maximum allowed limit in the Maastricht treaty. Germany has been systematically breaking the rules.

https://www.intereconomics.eu/contents/year/2018/number/3/ar...

"The rules established under the EU’s macroeconomic imbalance procedure (MIP)define a ceiling for current account surpluses of six per cent of GDP and stipulate that the three-year average for a country’s current account surplus should not exceed this ceiling.2 However, Germany has been running surpluses in excess of this figure for many years. Its most recent three-year average is eight per cent of GDP, while the 2016 figure was even higher, at 8.5%."

Put simply, Germany wants (or wanted - we don't talk about the euro crisis much anymore even though it was never really resolved) everyone in the EU to a) trade mostly with other EU members, b) run a trade surplus. This is obviously impossible, but Germans don't want to hear that in a modern economy, for Germany to have no debts means someone else must. They sent moralists to do an economist's job.

That being said I have no idea what the OP was on about, it's not illegal, it's just stupid.

I read somewhere that europeans agreed to an open market and common currency that included Germany only if German's export surplus were contained. I dont know if they are part of the treaties of not.

The idea being, why would Italy, France and Greece agree to open their market and give up their currencies (ie ability to devalue) in the face of the German juggernaut? A joint market would destroy French and Italian industry and in-debt Greece - as happened.

<rant> The Euro zone was a mistake. Its premise was solid - the europeans no longer had the ability to have colonies to steal resources from, so they sought to create a large enough market to be relevant and muscle themselves into decent prices.

It failed because the US quickly made sure the euro never seriously challenged the USD. Also, a continent that makes < 1.5 children/woman is not a going concern so no one has ever taken them seriously. Finally, the rise of China and India sealed the EU's fate. </rant>

“europeans agreed to an open market and common currency that included Germany only if [Germany makes a certain concession]”

It was rather the other way round: Germany was made to agree to the euro project as a concession for reunification.[1]

All in all, this seems to have been beneficial for a majority of normal people in the countries getting a stronger currency and for a minority of people in Germany, who export: Consequently, Germany’s wealth distibution tends to be the most unequal in the euro zone,[2] and its median wealth is slightly below that of Slovenia and significantly below that of France, Italy and Spain.[3]

[1] https://voxeurop.eu/en/you-get-unification-we-get-the-euro/

[2] https://www.reuters.com/article/us-germany-wealth-idUSBREA1P...

[3] https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...

"It was rather the other way round: Germany was made to agree to the euro project as a concession for reunification."

So the Germans accept the Euro in exchange for re-unification (France's biggest mistake IMO) Thats one negotiating point.

Second negotiating point: who's in charge of the Euro? Who's industrial interests are represented by the ECB? Germany needs cheap imports (strong currency) or its industry screeches to a halt.

Germany needs a currency that is too strong for its direct neighbors and too weak vs the world economy. Something like shouldn't even be possible yet this entire HN submission is about how Germany should continue distorting the markets.

> Also, a continent that makes < 1.5 children/woman is not a going concern so no one has ever taken them seriously.

So much wrong with that sentence.

The birth rate went that low (and lower!) but has been going up recently[0]. But even if total population was halving every generation, that’s only a concern if it’s sustained for many generations, and population forecasting (especially this simplistic) has never been particularly accurate over such periods.

Then there’s the second half. Europe has been vastly important worldwide from roughly the age of exploration to the end of WW2, and even then only stopped being temporarily because of active efforts by both of the two superpowers — who, despite arms reduction treaties, still have enough nukes each to destroy all settlements worldwide with populations over 150,000 [1] — and yet despite that the EU (less than the whole of Europe) has close to the same GDP (18 T) [2] as China (20 T) [3] and the USA (25 T) [3].

[0] https://www.macrotrends.net/countries/eur/europe/fertility-r...

[1] https://www.reference.com/geography/many-cities-world-c25cce... and https://en.m.wikipedia.org/wiki/List_of_states_with_nuclear_...

[2] https://en.wikipedia.org/wiki/Economy_of_the_European_Union

[3] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

Fertility rate in EU seems to have peaked in 2016 (it declined every year from 2016 to 2020).

I think the data you linked is prediction from year 2020 onwards, and there is no observed increase from 2013.

Interesting; that's not at all clear to me from the page even after you say that. But very plausible.

"The birth rate went that low (and lower!) but has been going up recently[0]. But even if total population was halving every generation, that’s only a concern if it’s sustained for many generations, and population forecasting (especially this simplistic) has never been particularly accurate over such periods."

Who cares what the halving period is? You still have an inverted population pyramid. Have fun paying pensions. Even if you started popping 3 kids per woman today you still have 30 years before they become productive (debauchery during an Erasmus is not a productive use of time). How's Europe going to pay bills until then?

Btw, 3 kids / woman in Europe is a laugh - 70 years of technocratic rule have resulted in city infrastructure that are unlivable for "large" families. Sure, it's possible to have three kids in a two room 80 sq m apt, and I know people who have done so. But why would you if you have the qualifications to move abroad?

"Then there’s the second half. Europe has been vastly important worldwide from roughly the age of exploration to the end of WW2, and even then only stopped being temporarily because of active efforts by both of the two superpowers — who, despite arms reduction treaties, still have enough nukes each to destroy all settlements worldwide with populations over 150,000 [1] — and yet despite that the EU (less than the whole of Europe) has close to the same GDP (18 T) [2] as China (20 T) [3] and the USA (25 T) [3]."

I really dont understand how your point about nuclear weapons is germane to this discussion. Ill have to ask the French and Brits? Naw, Ill just ask the Germans who financed their welfare programs by gutting their defense budget safe under said nuclear umbrella.

As to Europe's post war relevance - Europe has no resources and the Asians have caught up, and surpassed, technologically. Where's Europe's competitive advantage?

Europe's GDP is not impressive. Actually, its trend is very bad. Look at Europe's share of world GDP as a function of time from the sage if Discovery. On top of that Europe's GDP is highly dependent on the tertiary sector, dumb things like "tourism" which has low margins and dulls the minds of the people involved.

Europe is not a going concern. Heck Im expecting a new debt crisis in the EU this year

> You still have an inverted population pyramid.

As does the USA and China, with fertility rates of 1.7 (according to Google).

> Have fun paying pensions.

Pension ages are increasing. Germany is also encouraging immigration, but that's only going to affect Germany as a million across Germany is economically relevant but the same million across the entire continent isn't.

But, we also have improving tech for old age care as everyone saw this coming since the Japanese did it first, and anti-aging in lab rats is now at the "huh interesting" stage. Nothing's guaranteed of course, this is just to illustrate that everything can radically change for reasons you don't consider. Like a global pandemic or a land war in Asia.

> 70 years of technocratic rule have resulted in city infrastructure that are unlivable for "large" families. Sure, it's possible to have three kids in a two room 80 sq m apt, and I know people who have done so.

And as the population goes down, everyone still around gets more space.

> But why would you if you have the qualifications to move abroad?

Where? Europe is very varied from one country to another, but overall it's better than most places worldwide — while not as much as the USA, the USA doesn't seem to want immigrants, and conversely much better than China and India which you previously described with the sentence "Finally, the rise of China and India sealed the EU's fate".

> Ill have to ask the French and Brits?

Both of which have only enough to deter outside forces from destroying them, they didn't have enough military power to e.g. keep their empires.

> Ill just ask the Germans who financed their welfare programs by gutting their defense budget safe under said nuclear umbrella.

The modern state of Germany literally only exists because of the fall of the decline and fall of Soviet Union, allowing reunification. They felt safe for fairly obvious reasons, but that postdates the only period of European weakness since the age of exploration.

> Where's Europe's competitive advantage?

This is the only relevant question. I don't have an answer (software engineer not economist), but everything else you've said either doesn't matter or can't be treated as a long-term trend.

> Europe's GDP is not impressive.

The EU alone being the third largest on the planet isn't impressive? As you sometimes write of the continent and sometimes of the EU, I will also add that if Brexit had not happened the EU alone would be above China right now, and you can add another trillion for the EFTA. The biggest economic issue the continent has right now is that Russia and Ukraine are both in the continent, and each is likely to see order-of trillion dollar costs.

> Actually, its trend is very bad. Look at Europe's share of world GDP as a function of time from the sage if Discovery.

"Everyone else is catching up" is not a bad thing. If all else was equal, every nation would have a share of GDP equal to their share of population, which would put Europe at double the GDP of the USA and China at four times the GDP of the USA.

> On top of that Europe's GDP is highly dependent on the tertiary sector, dumb things like "tourism" which has low margins and dulls the minds of the people involved.

Tertiary sector includes tourism, but isn't limited to it. Tourists is 10% of EU GDP. Tourism includes museums.

Other things in the tertiary sector include education, IT, FIRE, management consulting, and public health.

It's generally seen as a good thing, and is more than half of both China's and India's GDP.

> The idea being, why would Italy, France and Greece agree to open their market and give up their currencies (ie ability to devalue) in the face of the German juggernaut?

Because they couldn’t manage their currencies and always dreamt of low inflation, in a few words: they wanted the Mark. Calling it Mark would have upset the nationalists, so they made the Euro.

> The Euro zone was a mistake.

Outside of the eurozone, Italy would have gone bankrupt in the mid 2000s, Greece a few years later.

"they couldn’t manage their currencies "

Typical Northern Protestant bigotry. As if Italians and Greeks don't have economics courses in college.

Italians, Greeks, etc would purposely devalue their currencies to effectively lower wages (which are sticky) wrt to international markets, making their exports competitive while manufactured imports more expensive. The French created the CFA (under the bayonet) to have a larger economic mass to play with (the most egregious post WW2 colonial abuse by Europe).

of course this policy results in (very well managed) inflation which results in the middle class saving through real estate, hence these countries' high rates of home ownership (Greece in particular).

So the single market (ie no protective tariffs) and a single currency are poison to Southern Europe's industry so why should the agree to it? They agreed under the condition that Germany's industrial appetites wouldn't be rapacious. Which was a great plan, after all when has Germany ever tried to swallow its neighbors? /sarcasm

> Typical Northern Protestant bigotry. As if Italians and Greeks don't have economics courses in college.

For your information I am Italian, I won’t reply to the rest of your fantasy, but I have to say that I’m very surprised that this CFA thing is popular also outside Italian economic conspiracy websites.

> They agreed under the condition that Germany's industrial appetites wouldn't be rapacious.

So you are saying that when Italy joined the euro, they asked the Germans to slow down research and development and to artificially reduce the productivity of its industry? Or does “rapacious” mean that the Germans send assassins to kill good Italian managers? Are you implying that Italians are inherently less productive than Germans?

"For your information I am Italian"

So was I until I grew out of it. What's your point?

"Are you implying that Italians are inherently less productive than Germans?"

... yes? The data is very clear about that including significantly less cars made per employee hour in FIAT's Napoli plant than in, say, Poland.

I didnt venture an explanation as to why Neapolitans make less cars, nor do I care. The role of Rome, or any government, is to represent the interest of its citizens.

If Napoli makes less cars because there's less capital invested or because they all get sick during the world cup is of secondary concern to me. My primary concern is that the internal market ensures my citizens are employed in a dignified labor (and not that story of a woman offered 200euros/month to work 6 days a week as a cashier)

"but I have to say that I’m very surprised that this CFA thing is popular also outside Italian economic conspiracy websites."

The CFA is not a conspiracy theory, ask Congo (or Gaddafi. Or do a HN search in the bottom of this page), and you'll find websites in all languages talking about it. Especially French, but Ive read websites in Spanish, and in English.

The only language I haven't read about the CFA is in Italian, but the Italian internet is... dull.

"Or does “rapacious” mean that the Germans send assassins to kill good Italian managers?"

I think German appetites are well known in Europe going back a millennia. Im hardly the first to note that the Germans have, through the EU, accomplished exactly what they've wanted what they've failed to do in a thousand years of warring.

"So you are saying that when Italy joined the euro, they asked...."

Read my original comment. I clearly state that I dont know if it was in the treaties or not, however it is a common complaint that there supposedly was an agreement. I then explained why that agreement would make sense, since no rational actor could possibly enter a single market without some safeguards.

> So was I until I grew out of it. What's your point?

That I’m not Nordic nor Protestant.

> ... yes? The data is very clear about that including significantly less cars made per employee hour in FIAT's Napoli plant than in, say, Poland.

So, is it a racial thing? The Italian is inherently less productive because he doesn’t have the German spirit?

> The CFA is not a conspiracy theory, ask Congo (or Gaddafi.

I’m not sure Gaddafi opinion would be relevant.

> I think German appetites are well known in Europe going back a millennia. Im hardly the first to note that the Germans have, through the EU, accomplished exactly what they've wanted what they've failed to do in a thousand years of warring.

So the Germans are back at the Reich thing and Frau Merkel is a cover up because we are scared of people with moustaches.

> Read my original comment. I clearly state that I dont know if it was in the treaties or not, however it is a common complaint that there supposedly was an agreement. I then explained why that agreement would make sense, since no rational actor could possibly enter a single market without some safeguards.

So you read it on a blog and you think it makes lots of sense but you can’t explain how? What are these safeguards supposed to be? If Audi makes too many Audis than Frau Merkel has to drive a Fiat Punto?

I don’t think you should continue with this.

Or maybe they would devalue their currencies and reindustrialize?

To reindustrialise, whatever it is supposed to mean for a country like Italy, has nothing to do with debasing a currency, unless the plan is to surreptitiously cut real salaries and hope nobody will ask for pay rises. They have been doing that in the UK since 2007, all they got is lower salaries.

Instead they got hush money to keep rotting away their industrial base and make sure that the best thing they have is German products consumers. I am forever angry at German "high politics", how did they think this is going to turn out? And they didn't even have the guts to say to their citizens "Hey you know all this EU-growth? It is because we suppress the periphery"

I hear this quite a lot. Italy received free money, but that was a secret plan of the Germans to take over the country, because they know that Italians are stupid and would destroy their industry and buy lots of Audis. But this eventually destroyed Italy and now nobody is buying Audis.

This implies that Italians are dumb and that Germans are still in the business of making evil plans that fail at the end, because good always triumphs.

"whatever it is supposed to mean for a country like Italy,"

Go look at the econ stats circa 2000 of Veneto, Lombardy and Piedmont and compare them to Germany's.

I mean that Italy, especially the north, has one of the strongest industrial sectors in the EU. It’s not a country that has to reindustrialise and even if it were, it would be doing it by debasing its currency.

Germany cuts wages in response to cuts in neighbouring countries. It must remain the export champion after all.

Germany doesn't cut salaries because it's not the Soviet Union where salaries are centrally planned nor a lady that can change prices turning a knob. Besides, salaries in Germany have been increasing every year in the past 20 years (bar 2020, for obvious reasons).

You can decrease real wages too. It is the same thing.

Poland is doing far better precisely because it isn't in the Eurozone.

One would have to admit that Poland is still catching up, otherwise they would have to explain why the UK is doing so bad outside of the eurozone.

Not just a common currency area, most of the world, but is there anything wrong with that? Somebody has to have savings to stand up to the corporates. Its what Obama's Diesel-gate was all about! Obama (remember him?) was telling Merkel to run a trade deficit, but stepping back, what you have are different countries dictating policy to other countries, in this case the US dictating to Deutschland how to spend their money. The meme being pushed in financial circles is "debt is money", when what they really want to say is the biggest borrowers get to dilute their currency the most and dilute, which can be read as weaken, the purchasing power of other people. So you see countries like the UK ramping up house prices, mortgages creating new money in the absence of the UK actually making anything of any worth, shelter is also on the lower tiers of Maslow's Hierarchies of Needs , the British Media pumping out thousands of hours of property porn to reinforce Asch conformity, is all in all a highly intelligent way to control people using stealth means!

init(clever);

I mean, the US saves very little money and yet was able to stand up to VW Group, so I'm not sure what "has to have savings" has to do with your example.

Obama's observation was that you can't run a trade surplus with Southern Europe for decades and then get all surprised when they run out of money to pay you with. In a similar vein, you can't have EU cross-border banks without a EU cross-border insurance deposit scheme, because then one bank can potentially drown a small country, which is what happened during the Eurozone crisis.

Debt dilutes the currency because money is created every time someone takes on debt, it means your overseas creditors ie other countries get their money back, but its worthless today than in the past, because this is monetary inflation, not to be confused with the man on the streets inflation which is price rises. At the end of the day its just an intellectuals way of keeping the plates spinning and the uneducated in their place. Now it also happens this is a way for banks to wrestle power away from the politicians, just like stock market listed companies can put a ban on recruitment when a new political party comes to power, increasing unemployment. Its hard for Govt's to prove this, because legislation isnt the brightest, in fact, legislation can create fake science. Its a massively complex subject and education is the first step in divide and conquer.

What § would that violate? This must be one of the (many) anti-EU fake news.