By Stephen Brown
BERLIN Nov 21 Chancellor Angela Merkel on
Thursday defended Germany against international criticism that
it was not doing enough to reduce its high trade surpluses and
rejected the idea that it should deliberately weaken its
Speaking in Berlin, Merkel said it was "absurd" to suggest
German companies should reduce their quality or that wages in
the export sector should be higher to weaken their competitive
"It cannot and should not be the case that anyone tries to
weaken Germany's competitiveness artificially," Merkel said.
International criticism has mounted that Europe's largest
economy must do more to spur domestic demand and that its
reliance on exports is hampering Europe's economic stability and
hurting the global economy.
The U.S. administration reprimanded Germany late last month
in its semi-annual report to Congress for its economic
imbalances. Germany's current account surplus, at 19.7 billion
euros in September, is the biggest in the world.
European Commission President Jose Manuel Barroso has issued
a similar message: Germany has "homework" to do on stability in
the euro zone.
The trade surplus alone hit a record high in September as
exports rose. The seasonally adjusted trade surplus widened to
18.8 billion euros from 15.8 billion in August.
Germany argues it has more than halved its current account
surplus with the euro zone as a share of GDP since 2007.
Germany shed the label of "sick man of Europe" after
reunification in 1990 partly through years of wage restraint
that made it more competitive. Its economy is now outpacing its
peers and it is under pressure to do more to help the euro zone
out of its crisis by stimulating domestic demand and buying in
more imports from the rest of the currency bloc.
Germany has exported more than it imports since 1952. Its
trade surplus is largest vis-a-vis France, the United States and
Berlin's critics say its overall current account surplus
last year was 6.9 percent of GDP - well above the 6 percent
threshold the European Commission considers excessive.
They say Germany is still saving too much and needs to
liberalise its service sector to boost domestic demand.
Separately, Merkel said on Thursday that Germany is ready to
work on European Union treaties in order to introduce a European
banking union that would both police banks and find joint
solutions to their problems.
Banking union would put the European Central Bank in charge
of policing lenders from late next year and ultimately form a
united front across the euro zone to back ailing banks or close
Germany is attempting to weaken a central plank of banking
union, namely that the euro zone clubs together to tackle frail
banks, for fear that as the richest member it will end up
footing much of the bill. Instead, Berlin wants losses imposed
on bank creditors, including bondholders, once stress tests
identify the weaker lenders.
The debate about who pays for the clean up of Europe's banks
is set to continue to hamper Europe's most ambitious reform
since the inception of the euro currency in 1999.