Ending the Surplus

German wages and spending: a modest boost

Demonstrationen der IG Metall in Kiel
A good deal for union workers, but probably not the one foreign economists were hoping for. Source: DPA

Back in 2014, even the Bundesbank got on the bandwagon: Germany’s booming economy could cope with higher wages for its workers, the central bank said. That drew the ire of the country’s export-happy companies, many of whom take pride in having an edge over the global competition and have long resisted the pressure.

Better pay has long been a clarion call from neighboring countries and international organizations, who are concerned that Germany’s massive current-account surplus of more than 8 percent of GDP is putting the world out of whack. Ones who don’t focus on salaries tend to put pressure on the government, calling on Berlin to increase government spending and stop balancing its budget, as it has done for three straight years.

Those critics got a mixed bag of news out of Germany this week. Berlin has agreed a new coalition government (pending a party vote) that includes a meager amount of new spending and tax cuts. Metalworkers meanwhile agreed to a two-year wage deal with employers that will set the stage for other industries. Perhaps the key takeaway: Germans don’t really want that much extra money to spend.

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