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German fiscal policy helps all of EU

When I came to Washington as the new German ambassador in May, one thing really surprised me: Nearly everybody I talked to had a strong opinion about the German economy and whether it is fostering or hindering development in the world.

A lot of those opinions were positive, stressing the sustainable practices and income equality in Germany. But others continue to be fiercely critical, asserting that Germany holds an irrational belief in belt-tightening and has a solely export-driven growth model, and that this is the main impediment to economic growth in Europe and worldwide.

First, let us get the facts straight: Germany is projected to grow faster this year and next than it did in 2012 and 2013. It continues to be an engine of growth in Europe. Employment stands at a record high and real wages are increasing. The German government is supporting this trend with the introduction of a minimum wage of 8.50 euros an hour, or about $10.60. As a result, the German economy is increasingly driven by domestic demand.

Our exports also are a source of growth for our partners. People around the world like to buy high-quality German products, such as cars and machinery. These products rely to a great extent on a global supply chain. Imports, mainly from our European partners, account for 40 cents of every euro worth of German exports.

Furthermore, we are not exporting more than we are importing from the eurozone. A current account surplus is not a target of German economic policy. Our policy is rather to create the right framework for companies to thrive. We are convinced that this is the best approach to foster sustainable growth. One important element to achieve this aim is the successful conclusion of the Transatlantic Trade and Investment Partnership between the United States and the European Union.

Is Germany investing too little, as critics say? I beg to differ. We all agree: Investment is the key to future prosperity. But we need to make sure, especially when spending taxpayer money, that we achieve lasting results and not just a flash in the pan. What’s needed today is private investment complemented by targeted investments from the public sector.

We now are witnessing that the often painful structural reforms in some EU countries have been paying off over the past two years. Their economies are growing again. And with respect to the institutional and economic framework in place for the eurozone, which some have criticized as being too unforgiving and unyielding, its rules have been agreed upon by all the members.

Finally, it’s not just about policies but also about convictions. Our government’s commitment to a balanced budget and a reliable fiscal policy enjoys broad support among our citizens. Like many industrialized countries, Germany is experiencing a dramatic change in its demographics. This means that the debt we incur today will need to be paid back by fewer people in the future. We simply can’t kick the can farther down the road. The reliability and sustainability of our policies and finances are preconditions for well-being and shared prosperity. This is true for Germany as well as for Europe.

One fundamental cornerstone of German policy is clear: For Germany to be successful, a competitive and thriving Europe is essential and, therefore, at the core of our efforts.

Peter Wittig is Germany’s ambassador to the United States.


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