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“Our Surplus Is the Deficit of Our Partners”: Interview with Heiner Flassbeck


Economist Heiner Flassbeck holds the German wage policy responsible for the problems of Greece.

Neither the drastic Greek austerity program nor the proposed European Monetary Fund can help the euro zone out of its difficulties.  Instead, Heiner Flassbeck calls for higher wages in the Federal Republic of Germany in order to cope with the crisis.  Bernd Kramer has spoken with the chief economist of the UN Conference on Trade and Development (UNCTAD) and former Vice Minister of the Federal Ministry of Finance.

Mr. Flassbeck, will the drastic austerity program solve the problems for the Greeks?

No.  On the contrary, it will make them worse.  If the state saves during a recession, the demand will evaporate, too.  The economic and budgetary situations will get worse.

From your perspective, is wage restraint in Germany a major cause of the Greek tragedy?  Others say that the Greeks have simply been living beyond their means.

One can only live above one’s circumstances if someone else is living below his!  The Greeks have certainly overdrawn their account, but that alone does not explain the huge trade deficits of all the southern European countries and the surpluses of the Federal Republic.  Wage restraint in the past has made the German economy very competitive — at the expense of others.  Unit labor costs are significantly higher in the southern European countries than in Germany.  This has led to the giant German trade surpluses.  The German surplus is the deficit of its trading partners.  This is now clear in Greece.  The country must cope with high budget and trade deficits.

Wage restraint has saved many jobs in the German industry.  The strength of our industry is now again the envy of many.

They fail to recognize the significance of the monetary union in this context.  The German policy of belt-tightening has worked so well only because its trading partners could no longer devalue their own currencies.  Devaluation on their part would have led to a rise in the prices of German exports and a reduction of German surpluses.  Germany has abused the monetary union, because an agreed-upon inflation target was 2%, which Germany, with its wage settlements, has not respected.

Even if politics were different, it could exert no influence on the wage policy in the metal industry.  In Germany the rule is collective bargaining without government interference.

When Gerhard Schröder was the chancellor, he pursued the policy of massive pressure on the labor unions.  Correspondingly, wage increases fell.  The same applies to the most recent collective bargaining agreement in the metal industry.

Do we need a European Monetary Fund?

No, we do not need a new institution.  Rather, we must address the real problems.  Therefore, a European Monetary Fund is no guarantee.  Just look at the International Monetary Fund (IMF): its action is vigorously criticized by many developing and emerging countries, because the economic policy it demands has solved hardly any problems — rather it has only worsened the lot of broad social classes.

The IMF aided the crisis-ridden Asian countries in the late 90s.  A little later they registered growth again.

However, what was crucial was that the affected countries there could depreciate their own currencies greatly and thus improve their competitiveness.

Chancellor Merkel wants to fight harder against speculators.  Should speculative financial instruments like credit default swaps (credit default insurance) be prohibited?

Definitely.  These financial instruments have no benefit but only do harm.  They have, for example, contributed to the emergence of unjustified horror scenarios regarding the solvency of Greece.

The original interview “‘Unser Überschuss ist das Defizit der Partner'” was published in Badische Zeitung on 13 March 2010.  Translation by Yoshie Furuhashi (@yoshiefuruhashi | yoshie.furuhashi [at]  See, also, Heiner Flassbeck, “The Greek Tragedy and the European Crisis, Made in Germany” (13 March 2010).

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