Wages moderation in Germany - at the origin of France's economic difficulties

Mathilde Le Moigne and Xavier Ragot
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Mathilde Le Moigne: ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres

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Abstract: If the future of the euro zone does indeed depend on political cooperation between France and Germany, then economic divergences between the two countries should be a cause for concern. These divergences need to be analysed, with particular attention to three specific areas: the unemployment rate, the trade balance and the public debt. Germany's unemployment rate is falling steadily; in June it was under the 5% mark, which represents almost full employment, whereas the French rate is over 10%. Germany's low unemployment rate does not however reflect strong consumption by German households, but rather the country's export capacity. While France continues to run a negative trade balance (importing more than it exports), Germany is now the world's leading exporter, ahead of China, with a trade surplus that will run close to 8% in 2015. As for the public deficit, it will be around 3.8% in France in 2015, while Germany is now generating a surplus. This has impressive consequences for the way the public debt is changing in the two countries. In 2010 they were similar, at around 80% of GDP, but in 2014 Germany's public debt fell below 75%, and is continuing to decline, while France's debt has continued to grow, and has now hit 97%. This kind of gap is unprecedented in recent times, and is fraught with mounting tension over the conduct of monetary policy.

Keywords: Wages moderation; Public debt; Trade balance; Competition (search for similar items in EconPapers)
Date: 2015-09
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Published in 2015

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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03594303

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