Last year, the great and the good were repeatedly found advocating that Germany should increase government spending, and hence public debt, to boost demand across the eurozone. It was consistent with a line that has echoed round the commentariat for the last five years, that somehow demand in Germany needed to be boosted.
From the scale of the unemployed resources across the euro-area it is pretty clear that, in the abstract, a boost to demand would be helpful. But fiscal policy is national, and it was never clear to me why German voters would regard additional spending and debt as a “good thing”; something worth supporting at the ballot box.
To me, the chart below helps explain why a sensible German voter might reasonably be averse to expansionary fiscal measures. Not only is the German unemployment rate low but Germany has been doing relatively better economically than it did in the half decade or so prior to the 2008/09 recession, but Germany’s public debt doesn’t look so good in international comparisons.
The IMF World Economic Outlook database has data on net government debt as a percentage of GDP. Germany is in blue. The other lines represent two other broad groups of European countries German voters might compare Germany with. The green line is the median of net debt to GDP for France, Spain, Italy, Greece and Portugal. And the red line is the median of the other Germanic/Nordic countries: Austria, Switzerland, Netherlands, Denmark, Norway, Finland, and Sweden. For that latter group, median government debt has been lower than that in Germany for the whole of the last 20 years. German voters might reasonably conclude that the Northern European route was more attractive than the Southern, on this count as well as others (including good governance, low levels of corruption etc).
Of course, it might be different if German voters for some reason put the interests of the euro area ahead of those of Germany. But, much as the elites might wish it otherwise, there is no sign of that happening. Politics is mostly national, even in the euro area.