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dc.contributor.authorSpethmann, Dieteren_US
dc.contributor.authorSteiger, Ottoen_US
dc.publisher|aZEI |cBonnen_US
dc.relation.ispartofseries|aZEI working paper |xB 29-2004en_US
dc.subject.stwÖffentliche Schuldenen_US
dc.subject.stwEuropäische Wirtschafts- und Währungsunionen_US
dc.subject.stwInternationaler Wettbewerben_US
dc.titleDeutschlands Wirtschaft, seine Schulden und die Unzulänglichkeiten der einheitlichen Geldpolitik im Eurosystemen_US
dc.title.alternativeGermany’s economy, its debts, and the shortcomings of the Eurosystem’s common monetary policyen
dc.type|aWorking Paperen_US
dc.description.abstracttransIn 2004, Germany became Europe’s ‘king of debt’ in absolute figures, thereby leaving behind evenItaly, for decades the bearer of this awkward title. However, Germany’s rising public debt is not dueto loose fiscal policy but the result of the common monetary policy in European Monetary Union(EMU). While Germany has the lowest rate of inflation in EMU, it has to pay the same nominal rateof interest as its competitors, that is, it has to shoulder the by far highest real rate of interest. This inturn has led to economic stagnation, with decreasing tax revenues and, in spite of huge efforts toreduce public expenditures, rising debts. As Germany is still the biggest economy in Europe, itsstagnation has decisively contributed to EMU’s slow economic growth. According to the authors, thenot so pleasant state of Euroland is due to the fact that EMU is not an ‘optimal currency area’ (RobertMundell). EMU does not fulfil one of the most important criteria for optimality: the absence oftremendous differences between its member countries’ real rates of interest.In the paper, several measures of how to overcome the German problem are discussed,especially how to reconstruct the Eurosystem, the decentralised central banking system of EMU, toallow for a differentiated monetary policy, with high (low) nominal rates of interest for high (low)inflation countries. Drawing on a proposal by Erik Lindahl in 1930, this would mean to re-establishthe European Central Bank (ECB) as the central monetary authority in the Eurosystem, with themonopoly to issue money. In spite of its name, the ECB is not a bank of issue, not to speak of being alender of last resort, but only a co-ordinating agent between the Council of Governors of theEurosystem, the decisive institution for monetary policy in EMU, and the twelve national centralbanks who alone issue the Euro. An alternative proposal discussed is to assign to the strongest centralbank in the Eurosystem, the Bundesbank, the role of the Federal Reserve Bank of New York in theFederal Reserve System, thereby transforming the Eurosystem into a European Reserve System ofFederal States. However, the strengthening of the ECB, or the Bundesbank, needs the support of acentral fiscal authority in EMU, a role which today’s EG Commission in Brussels cannot shoulder : itdisposes only of a tiny amount of EMU’s aggregate tax revenues. The authors are aware of thepolitical difficulties to re-organise the Eurosystem. However, if politicians shy away from such areform, the only option for solving Germany’s stagnation should be to leave EMU.en

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