Question 2:Do you agree that the German government should increase public spending given its persistently large current account surplus and given that it is part of the Eurozone?
I think this will depend critically on the type of public spending. Public spending on investment incentives or infrastructure, for example, can further enhance the productivity advantage of German economy and can very well make the situation worst. The same might also be true for public spending that will enhance the flexibility of the labor market (such as child-related transfers). On the other hand, spending on housing or transfers to retired, cash or in-kind, might have a stronger effect on domestic demand and lower the savings rate.
I think German current account surpluses partly reflect positive supply shocks (such as labor market reforms that lowered wages and made German economy more competitive) and the current demographic structure that results in high savings rates. While the short term need for stronger demand from Germany to boost the Eurozone economy is clear, since the causes of German current account surpluses are more structural, they can only be addresses in the medium run. Furthermore, I think the challenge is to find economic mechanisms to handle such imbalances within a currency union. This will most probably will require further coordination of fiscal and labor market policies within the Eurozone and signalling Germany as a threat can slow down (rather than speeding up) establishing such mechanisms.
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Questions mainly focus on macroeconomic and public policy topics. Although there are some questions that focus specifically on the UK economy, the setup of the survey is much broader and considers questions related to other countries/regions and also considers questions not tied to a specific economy.
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German current account surpluses
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Question 2: Do you agree that the German government should increase public spending given its persistently large current account surplus and given that it is part of the Eurozone?
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Question 1: Do you agree that German current account surpluses are a threat to the Eurozone economy?
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