In a sign of continuing differences between key players of the euro zone, France's Economy Minister Christine Lagarde has said that the highly efficient and export-oriented German economy with its large trade surplus threatens the competitiveness of other euro zone members. She urged Berlin to encourage domestic demand to boost its EU partners' ailing export industries. Mrs. Lagarde said Germany had done an awfully good job in the past decade, improving competitiveness and putting high pressure on its labor costs. But she said she was not sure it was a good and sustainable model for the long term and for the whole of the euro group.
Berlin has retorted that the euro zone's top priority is harmonizing competitiveness among its members. A German government spokesman, Christoph Steegmans explained that it meant helping other nations raise their economies to the level achieved by Germany. He added that thee were no fixed government framework for the threshold of income or domestic demand. Mr. Steegmans feels other countries should develop their own innovative middle class rather than press Germany to curtail its competitiveness. Kirill Tanayev, Director General of the Efficient Policy Fund in Moscow, gives his view:
"When the French minister says the Germans bear responsibility for the state of affairs in the euro zone, I think she has her reasons. The euro zone has never been a cloudless space devoid of conflict. It's an illusion to think that everything in the euro zone is done in a common drive, especially in matters involving real economies. Faced with economic downturn, many countries think that ‘saving the drowning is up to the drowning". That's why, the German economy, being a locomotive of Europe's economic development, is trying to defend itself. The Germans just don't see why they should follow Greece into the precipice".
The Greek crisis that revealed a gap between the euro zone's members, the falling euro and the absence of clear-cut mechanisms to ensure common European economic prosperity suggest that the pre-crisis model is no longer working.
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