Wednesday, December 3, 2014

What Is The Logic Behind German Economic Policy Preferences In Eurozone?

Germany is the largest and most successful economy in the eurozone.  It's policy preferences may be one of the factors that have stalled the eurozone economy.  Antonio Fatas offers his explanation for Germany's policy preferences in this article.  Fatas argues that German leaders have a unique opinion about the factors that led up to the economic crisis, and that they prefer structural changes that may be good in the long run, but which are counter-productive in the short run.  German leaders, according to Fatas, also have an attitude about inflation that differs from that of most central banks which have a 2% inflation target.  Germans seem to prefer a zero inflation target.

Fatas sounds a lot like Paul Krugman in his critique of German economic policy preferences.  My guess is that electoral politics in Germany shape the German preferences.  The public has been generally supportive of German economic policy preferences.

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