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Is Germany damaging the European economy?

Graham Watson

29th November 2019

A fascinating stretch-and-challenge article here for high fliers, this fantastic Guardian article looks at why a current account surplus can be problematic, and not just for the economy experiencing it.

Maximilian Krahe and David Adler write that the state of the German economy is a real problem, both for Germany and the Eurozone more widely. Picture this: Germany is currently in recession and still has a current account surplus. How can this happen and what causes this.

Similarly, the article postulates that the current account surplus damages other European economies - at its most basic, it represents a leakage from their circular flow. So how does Germany go about correcting this.

Interestingly, when talking about current account problems, Keynes was astute enough to see countries with persistent surpluses as more problematic than those with small deficits, and he also argued that those countries stood more chance of being able to correct those surplus than countries experiencing a current account deficit.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to Tutor2U, reads voraciously and is interested in all aspects of Teaching and Learning.

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