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Just looking at the macro numbers - net exports as a percentage of GDP, labor force participation as compared to best practice, I would say that the problem with the German economy is that the german worker is being paid.. somewhere  around 15 % too little. In real terms.

10% export surplus. Every year. That's insane - you cant keep on selling more stuff than you buy and get paid, it is a logical and accounting impossibility.

 Boosting consumption by ten percent would likely boost german output and labor force participation - and there is significant slack there - so demand has to grow by a good bit more than ten % to bring things back into balance.

 Since wage hikes that large probably would cause some inflation, in order to balance things, it would likely be necessary to hike wages 20 + % in nominal terms.

It bloody well has to be possible to sell this to the german people, if not the current german government. The problem with their economy isn't that they are living beyond their means, the problem is that they are living Vastly beneath their means.  

by Thomas on Thu Jun 5th, 2014 at 11:01:24 AM EST

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