Single Currency Never Particularly Benefited Germans

Why should Germans do more to save the euro when it hasn’t been a success for them?

American and British observers of the European debt crisis usually single out Germany in their criticisms of the continent’s apparent inability or unwillingness to solve its fiscal woes. The typical argument put forth is that Germany has been the principal beneficiary of the single currency and therefore should shoulder its fair share of the burden of preserving it.

The German perception is very different. Some 65 percent of Germans have come to believe that they would be better off without the euro, according to an opinion survey published in Die Welt last week. Nearly one in two Germans believes that they would be better off outside the European Union altogether.

German chancellor Angela Merkel may claim that she is willing to do “whatever it takes” to save the currency but that does not mean saving the eurozone as it exists today. The very fact that Northern European leaders are openly discussing the possibility of member states such as Greece leaving, which would have been unthinkable just a year ago, should raise red flags in Athens, Rome and Madrid — and give the English-language press pause.

However, major Anglo-American news media seem oblivious to the mounting Euroskepticism in Germany and reluctant to explore the facts which show that the country hasn’t disproportionately profited from the euro. Indeed, the enormous risks it has assumed in Europe’s attempt to salvage the currency may well turn out to outweigh whatever financial benefits it has derived from it.

Proponents of further German efforts to prop up highly indebted eurozone nations in the periphery of the currency union usually rest their case on Germany’s export surpluses in the years that the currency has been in existence. Between 1998, when the European Monetary Union was introduced, and last year, German exports have risen, from €488 billion to over €1 trillion. Most of this increase, however, consisted of exports to countries outside the eurozone.

German exports to other euro countries increased 89 percent while exports to European nations outside the currency union increased 116 percent. German international exports even rose by 154 percent.

In 1998, the countries currently in the euro area accounted for 45 percent of German exports. In 2011, their share had declined to 39 percent. The single currency does not appear to have enhanced German trade.

Another argument, that the German economy has prospered at the expense of deficit economies in the European periphery, is also false. Since the start of the twenty-first century, there has been no correlation between trade imbalances with Germany and fiscal crises in other euro states. Between 1999 and 2009, Germany’s trade surpluses with Belgium, Portugal, Luxembourg and the Netherlands increased but none of the Benelux countries is currently in fiscal crisis.

The German trade surplus with Greece doubled in the last ten years but most of that increase occurred immediately after Greece joined the eurozone in 2002. Germany’s trade imbalance with Ireland has been minimal while exports to China, Norway, Poland, Turkey and South Africa skyrocketed in the same period.

Despite Germany more than doubling its exports since the start of the monetary union, overall economic grow lagged behind other European states for years. During the 1990s, the German economy showed lackluster growth, in part as a result of reunification but even for the period 1998-2011, the average growth rate of 1.4 percent was markedly lower than France’s 1.7 percent, the Netherlands’ 2 percent and even below the eurozone average of 1.6 percent.

Germany’s relative economic success didn’t emerge until 2006 when the effect of structural economic, fiscal and labor market reforms enacted during the chancellorship of Gerhard Schröder began to pay off. Even if German growth rates caught up with France and the Netherlands, they didn’t surpass theirs.

In conclusion, it is difficult to argue that Germany has benefited most from the euro. Rather, the Southern European states, until recently, were the ones that benefited disproportionately not just from the single currency but the single market as a whole. They missed the opportunity to streamline their economies as well as their governments for an era of heightened competition, however. Germany had no choice but to. It is doing well not because but in spite of the euro.