Do not shed a tear for the allegedly suffering Germans who now face the prospects of footing much of the bill for the bailout of the Greek government’s debts. Germany has taken advantage of the EU system for years to live far beyond its means, just like Greece, Spain, and Portugal have.
At first, it can be hard to see the Greek and German fiscal imprudence as mirror images of each other. The Greek people and the Greek government accumulated too much debt, importing and borrowing too much. Meanwhile, the Germans seem like prudent savers who profited by exporting awesome German made goods all over the world, especially to the spendthrift European countries.
Look below the surface, however, and you’ll see that the higher German savings rate was parasitical on the higher spending rates of its profligate neighbours. There’s simply no way the German’s would have enjoyed the same level of prosperity and quality of life over the past two decades if their fellow Europeans were as fiscally prudent as they were. They needed their neighbours to spend because they were refusing to.
To put it differently, the fall of European trade barriers allowed the Germans to enjoy the best of both worlds: huge savings rates coupled with income from huge spending rates by others. Germany’s economic boom has been financed by the borrowing of the debtor nations.
Let me put it this way. Germany blaming its fellow EU members for “living beyond their means” is like Countrywide blaming borrowers for buying houses that were too expensive. First, it couldn’t have happened without Germany enabling it. Second, German’s did pretty well by the system until it broke down. It’s a bit much for them to suddenly start pointing fingers.