Greek Finance Minister Tsakalotos advised German Chancellor Merkel to invest more and so provide stimulus to the economy. “It just cannot be the case that in Germany, for instance, there are not a lot of projects with net present value when we have almost zero interest rates. If Europe doesn’t invest now, in 20 years, when we hope interest rates will be higher because we’ve returned to growth, they will regret that in the period of low interest rates they didn’t.” Tsakalotos said on Thursday.
According to Tsakalotos, it is the best time to invest and improve infrastructure now, due to extremely low interest rates. It would also provide stimulus to the economy increasing business confidence and leading to increase in consumption. On the other hand, Merkel apparently prefers to stick to the budget rules in order to meet deficit targets. Impact of different views of politicians of the countries within euro area on the policy that is required is explained in our previous article here.
Germany’s current-account surplus is around $286 billion which is 8.5 percent of GDP. This is the second largest surplus in the world. China has the largest current-account surplus in the world – $293.2 billion which is 2.7 percent of GDP. Merkel’s government claims that such a surplus proves German economic competitiveness.