Some things don’t change

From the Financial Times:

Another point overlooked by liberal internationalists is one made by Keynes in the interwar period as he retreated from his earlier liberalism. He worried that economic interdependence could increase the scope for friction between countries, even to the point of provoking war. Interestingly, economic relations within the eurozone often resemble war by other means. Germany looks to its eurozone partners (and other foreigners) to bridge the huge gap between what it produces and what it consumes, which is reflected in an astonishing current account surplus that was running at 7 per cent of gross domestic product at the start of the pandemic. This surplus is the counterpart of an excess of German savings over investment. Those savings were channelled into financing balance of payments deficits in southern Europe before the eurozone debt crisis of 2009-12.

German export dependency has often been a drag on the eurozone economy but, far from being grateful to the countries running counterpart deficits, Germany berated them in the eurozone debt crisis for supposedly profligate fiscal policies, while helping inflict savage shrinkage on the Greek economy and austerity more generally. In effect, argues Michael Pettis of Peking university, these peripheral countries absorbed the shortfall in German demand by increasing their unemployment and relaying excess German savings into investment booms that resulted in serious misallocations of capital.

Germany just can’t quit being the wrecking ball of Europe.