The leaders of Germany’s economy fired back at U.S. criticism of their swelling current-account surplus, arguing it reflects the strength of their companies and the weakness of the euro rather than a lack of domestic demand.
“It would be absurd to discuss whether German competitiveness should be reduced to narrow the current-account surplus,” Bundesbank President Jens Weidmann said in Washington on Friday.
There has been a drumbeat of complaints this month from the U.S. that the surplus, now topping 7 percent of gross domestic product, is a fault line in the global economy and that Chancellor Angela Merkel needs to pare it by stimulating demand at home.
Both the U.S. Treasury Department and former Federal Reserve Chairman Ben S. Bernanke have made that case, implying criticism of Germany’s bias towards tight fiscal policy.
“Stronger demand growth in Germany is absolutely essential, as it has been persistently weak,” the U.S. Treasury Secretary Jacob J. Lew said in the department’s semiannual report on foreign-exchange policies, which it published last week.
Bernanke used his recently begun blog to say “in a slow-growing world that is short aggregate demand, Germany’s trade surplus is a problem.” He advised Merkel’s government to act to raise infrastructure spending and wages.
“The fact that Germany is selling so much more than it is buying redirects demand from its neighbors (as well as from other countries around the world), reducing output and employment outside Germany at a time at which monetary policy in many countries is reaching its limits,” Bernanke said.
Also speaking in Washington, Finance Minister Wolfgang Schaeuble blamed the surplus on exchange rates as a declining euro makes products from companies such as carmaker Volkswagen AG cheaper in the international marketplace.
“When I have to defend the surplus, which I do sometimes these days, I point out that the exchange rate contributes to the surplus,” Schaeuble said.
Weidmann said “the depreciation of the euro of course plays a role because German products have become cheaper abroad as a consequence.”