Anyone who says that the German export boom is a relatively normal event that is the result of German productivity has not studied the relevant figures. The weakness of the German domestic market proves that this is not true. Only France has actually followed the rules set by European Monetary Union.

Originally posted in German at Makroskop

Translated and edited by BRAVE NEW EUROPE


Over the past 20 years, economic development in Europe has been dominated by trade. As Graph 1 shows, German exports in particular have shown a dynamic since 2008/2009 that eclipses all other export increases seen elsewhere. Even before the crisis, Germany was already on the winning track, but after the deep slump caused by the global financial crisis, the German trade surplus increased immediately and rapidly.

French exports were strong and in Italy, too, exports rose steadily after the global financial crisis, but the increase in German exports exceeds any normal benchmark. To illustrate this, we have shown the figures with domestic demand below in a normal scale and additionally in the scale of exports.


Imports also increased strongly in Germany and France over the whole of this period (Graph 2). France’s recent imports are almost at the same level as in Germany, although its exports have fallen massively. Italy shows a striking weakness here, with imports only slightly higher in 2018 than in 2007.


The collapse of imports after 2011, i.e. at a time when a slight upturn began in Europe, from which, as shown above, Italian exports also profited, allowed Italy to end its foreign trade deficit five years ago (Figure 3). As can clearly be seen in the figures below for investment and private consumption, this decline in imports is attributable to the weakness of domestic demand, but not to an improvement in its competitiveness. France remains in deficit because domestic demand is declining too, but to a lesser extent.

Foreign Trade Balance

In terms of the development of gross capital investment, France is in a good position in relation to Germany even after the major global recession, and there has also been a slight acceleration in recent years, almost as strong as that in Germany (Figure 4). Since 2007, Italy has been experiencing a dramatic and long-lasting lack of investment, having previously been in good shape, especially compared with Germany.

Gross Capital Investment

However, this does not mean much overall, as Figure 5 shows. In relationship to what was necessary for exports, investment activity disappears into insignificance – and this even applies to Germany in particular.

Gross Capital Investment

Germany also looks weak compared with France in terms of investment ratios (Graph 6). The German investment rate is historically low and has risen only slightly in the past “boom years”. This is the best evidence that there has never been a real boom.

Investment Ratio

Private consumption conclusively shows that a high price had to be paid for German wage dumping (Graph 7). Until 2011, real private consumption in Germany did not increase more than in Italy. France was the only country in the euro zone to have found a sensible mix of foreign trade and domestic stimulus. It was only after 2011 that Germany was able to catch up with the French trend. Italy, however, was fatally hit by a new recession in 2011 in the wake of the European crisis. Private consumption shrank and proved disastrous for the Italian economy.

Private Consumption

Here, too, a comparison with the export benchmark shows that the significance of domestic demand was extremely low overall (Figure 8). For three large countries such as those considered here, this is a revelation in economic policy because it shows that none of the responsible politicians had understood what is most important: providing the overall population with reasonable expectations in terms of domestic demand, which gives the most important impetus to investment activity.

Domestic Demand

It is simply the case that the most important prerequisite for reasonable domestic economic development is that real wages should follow productivity. Of the three nations, this was only the case in France (Figures 9 and 10). In Italy it was also largely the case, but the external shock was so great that it massively impaired productivity growth by weakening investment activity.

Real Wages




To round off the picture, it should be noted that in the past only in France has domestic demand played an appropriate role (Figure 11). In the first 10 years of European Monetary Union, Germany “effected” a level of state-fuelled demand that was far too low. Only recently, in the face of buoyant public revenues induced by the export boom, has it caught up with France.

Government Consumption


In the third part of this series, read why European economic policy is failing and why German ignorance of its own and European problems only shows that Germany would be completely incapable of solving its economic problems without European Monetary Union.