Germany’s Two-edged Business Model
Current Account Surpluses Fund Investment and Consumption – Abroad
SWP Comment 2013/C 37, 27.11.2013, 4 Pages Research AreasCurrent Account Surpluses Fund Investment and Consumption – Abroad
SWP Comment 2013/C 37, 27.11.2013, 4 Pages Research AreasGermany is facing a storm of criticism over trade. Numerous commentators, as well as the European Commission and the US Treasury, have condemned the German current account surpluses in recent weeks, objecting to the large export surplus and demanding its reduction. Germany would indeed have every reason to rethink its business model. Since 2000 German companies and investors have invested abroad on a grand scale – and lost a great deal of money in the process. Exporting capital has often been an expensive pursuit. It might therefore make sense to invest less abroad and more at home. But certain economies, especially in eastern Europe, would suffer under such a strategy shift, as cutting German current account surpluses would inevitably reduce the volume of foreign investment.