Europe needs German consumers -- FT Martin Wolf (short extract)

This is to compliment the piece I put out on Wednesday (in Turkish). I argued at the end of that note that the only way forward was for Germany to do away with merchantilist policies and support her domestic demand. Below is a similar view from Mr Wolf.

''So what is to be done? If the aim is to avoid disaster, the answer is temporary fiscal support for the struggling countries, robust aggregate demand in the eurozone as a whole and a substantial rebalancing of that demand, led by Germany. The fiscal support would be designed to prevent a short-term confidence collapse from triggering a default. In return, weak countries would need to commit themselves to falling nominal wages and a programme of fiscal retrenchment. I can see no justification for bringing in the International Monetary Fund, other than for technical assistance. To do so would demonstrate that this is not a true union at all.


Alternatively, the vulnerable countries could be left to dangle in the wind. But a currency union whose core country not only exports deflation, but also stands aside as members collapse is in deep trouble. Germany alone can decide whether it wants this union to prosper, or not.''