Living With a Single Monetary Policy
Germany
Living With a Single Monetary Policy
 The Problem: Economic Inequality
 Effect on Germany
 Potential Solutions
 Policy Recommendation
The Problem: Inequality
The Problem: Inequality
Government Deficit Averages
2000 to 2010
8.0%
Eurozone Average:
2.4%
6.0%
Germany:
2.2%
4.0%
2.0%
0.0%
nd
Finla a
aki
Slov
enia
Slov
al
tug
Por
tria
Aus lands
her
Net
lta
rg
Ma
bou
em
Lux
rus
Cyp
Italy
ce
Fran
in
Spa
ece
Gre
nd
Irela
nia
Esto ny
ma
Ger
ium
-4.0%
Belg
-2.0%
Comparison of Government Debt,
2010
200.00%
150.00%
Eurozone Average:
61.5%
50.00%
0.00%
rage
Ave
ce
Gree
Italy
ium
Belg
gal
Portu
nd
Irela ny
a
Germ
ce
Fran
ria
Aust
a
Malt ands
erl
Neth
rus
Cyp
n
Spai
nd
Finla
kia
Slova
nia
Slove
urg
mbo
Luxe
ia
Eston
Germany:
83.2%
100.00%
Source: The European Commission
The Problem: Inequality
Interest on Sovereign Bonds,
1995-2011
Source: The European Commission
Germany:
5.8%
10.0
%
Eurozone Average:
10.7%
20.0
15.0
5.0
Yearly Inflation Variation,
2011
6.0%
d
lan
Fin kia
va
Slo nia
ve
Slo gal
rtu
Po ria
s
st
nd
Au erla
th
Ne a
lt
urg
Ma mbo
xe
Lu rus
p
Cy
ly
Ita ce
n
Fra n
ai
Sp ce
ee
Gr d
lan
Ire ia
on
Est ium
lg
y
Be an
rm
Ge
1.0%
0.0%
d
lan
Fin akia
v
Slo enia
v
l
Slo ga
rtu
Po tria ds
n
s
Au herla
t
Ne ta urg
l
o
Ma mb
xe
Lu rus
p
Cy
ly
Ita ce
n
Fra in
a
Sp ce
ee
Gr nd
la
Ire ia
on y
Est man
r
Ge ium
lg
Be
Germany:
2.5%
4.0%
3.0%
2.0%
Eurozone Average:
2.7%
The Problem: Inequality
Current Unemployment Variation,
November 2011
25.0
0.0
5.0%
Source: The European Commission
Average Net Trade Variation, 1999 to 2010
€ 120
Eurozone Average:
4.7 Billion
€ 100
€ 80
In Billions
The Problem: Inequality
€ 60
Germany:
79.8 Billion
€ 40
€ 20
€0
-€ 40
-€ 60
and
Finl ia
ak
Slov ia
en
Slov al
tug
Por
tria
Aus rlands
he
Net
lta
Ma bourg
em
Lux s
ru
Cyp
y
Ital
nce
Fra
in
Spa e
ec
Gre
nd
Irela
nia
Esto ny
rma
Ge
m
giu
B el
-€ 20
Gross Domestic Production Trends
20
10
0
Eurozone Average for 2011:
1.4%
Germany for 2011:
3.0%
-10
2001
2003
2005
2007
2009
2011
-20
Belgium
Ireland
France
Luxembourg
Austria
Slov akia
Germany
Greece
Italy
Malta
Portugal
Finland
Estonia
Spain
Cyprus
Netherlands
Slov enia
Source: The European Commission
The Effect on Germany
The Effect on Germany
Loans to Countries in Crisis
France
Germany
UK
Private Exposure
Government Exposure
US
Italy
Greece’s debt directly owed to
the German Government:
15 billion Euros
Japan
Spain
Millions USD
0
20000
40000
60000
80000
Source: Bank For International Settlements
The Effect on Germany
German Trade in the Eurozone
Total trade within the Eurozone:
France 9%
41%
United States
7%
Netherlands7
%
Other
41%
UK 6%
Poland 4%
Italy 6%
Switzerland
4%
Percent of Workforce in Manufacturing:
29.7%
China 6%
A ustria 5%
Belgium 5%
Source: Statistisches Bundesamt Deutschland;
CIA.gov
The Effect on Germany
Private German Exposure to Eurozone
200.00
100.00
Non-bank
Priv ate Sector
Banks
50.00
Public Sector
150.00
0.00
Finland
Greece
Portugal
Belgium
Ireland
Italy
Luxembou
rg
Spain
Netherland
s
France
Billions USD
250.00
Source: Bank For International Settlements
Potential Solutions
Potential Solutions
Pushing for Stimulus
Financial Sector
Fiscal Budgets
Private Consumption
Potential Solutions
Drawbacks
Costly
Unpopular
May only have short-term effects
Potential Solutions
Pushing for Austerity Measures
Methods
 Reducing Government Expenditure
 Raising Government Funds
Enforcement
 Changing Management
 Political Agreements
Potential Solutions
Drawbacks
Risks deeper recession
Unpopular
Slows growth
Policy Recommendation
Policy Recommendation
Europe 2020
Education
Green Energy
Research and Development
Policy Recommendation
Implementation
Unemployment: 12%+
Government Debt: 90%+ of GDP
Ireland, Portugal, Greece
Policy Recommendation
Drawbacks
Uneven financial support
Lender Insecurity
Policy Recommendation
“We will only be able to strengthen our common currency if
we co-ordinate our policies more closely…”
–Angela Merkel
Policy Recommendation
Prevention: Standardization
Stability and Growth Pact
Annual financial inspection
Transparency
Conclusion
Inequality
German Connection
Stabilization
Prevention
Implementation
References
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References Continued
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