It is one thing for little Ireland to assume that she will recover through exports. It is more alarming when bigger countries assume the same thing, since then one has to ask: where will the demand come from? If we all wait for others to provide it, we may wait a long time.
Martin Wolf has been arguing for a while that the collapse of private demand in high-spending economies such as the UK and US has left a hole in the world economy that has to be filled somehow, and that those countries’ governments will only be able to do so much to fill it. Those limits may be reached in the British case sooner than he may have initially anticipated. As he points out today, the collapse of the German and Japanese economies is the logical flipside of this same coin. It seems that the Germans are finally waking up to the scale of the crisis; how depressing then to read that Berlin is as resolute as ever in its refusal to do what is necessary (HT Eurointelligence):
Auch wenn es immer weiter abwärts geht – weiteres Geld zur Stützung der Konjunktur will die Bundesregierung derzeit nicht bereitstellen. Gleich zu Beginn des Gipfels habe die Kanzlerin klargemacht, dass man nicht zusammengekommen sei, um über ein drittes Konjunkturpaket zu reden, heißt es später. Die Koalition ist sich darüber einig und lässt die Gewerkschaften, die entsprechendes fordern, abblitzen. “Kontraproduktiv” nennt Steinbrück deren Rufe nach zusätzlichen hundert Milliarden Euro.
On the contrary: Steinbrück’s obstinacy is what is counterproductive. One supposes they will eventually change their tune, but how many workers must lose their jobs before that happens?