October 7, 2014
As the rethoric goes, Germany has always been careful in taking out debt financing. In German culture debt is considered a sin, from which the literal translation of “die Schulden” is “fault” or “guilt”.
Every day Wolfgang Schäuble, the German finance minister, remembers all other European peers that debt is the problem, not a solution.
So the story goes and that would explain the relatively low current levels of government debt over GDP ratio, at 74.55% in 2014. In that respect Germany outdistances most European partners, that are struggling to stay below 90%.
Is this performance due to a trend of low debt or simply good growth performance compared to other EU states? To check, let’s assume that France, Germany, Italy and UK would have all grown at Italy’s GDP growth rate from 1991 until today. The result is shown in the graph, where data are taken from the IMF website.
Now Germany is not performing so well. France and UK are looking even worse than Italy.
So, it might be the case that the problem of the Maastricht debt/GDP rule is not the “debt” but the “GDP”. Asking for more relaxed conditions in public spending to boost GDP does not look like a stupid idea afterall.Claudio Baccianti