Ordoliberalism - Germany is the eurozone’s biggest problem, Wolf
As Peter Bofinger, an heretical member of Germany’s council of economic experts argues, the tradition goes back to Walter Eucken, the influential father of postwar ordoliberalism.
In this approach, ideal macroeconomics has three elements: a balanced budget at (almost) all times; price stability (with an asymmetric preference for deflation); and price flexibility.
This is a reasonable approach for a small, open economy. It is workable for a larger country, such as Germany, with highly competitive tradeable industries. But it cannot be generalised to a continental economy, such as the eurozone.
What works for Germany cannot work for an economy three times as large and far more closed to external trade.
In this approach, ideal macroeconomics has three elements: a balanced budget at (almost) all times; price stability (with an asymmetric preference for deflation); and price flexibility.
This is a reasonable approach for a small, open economy. It is workable for a larger country, such as Germany, with highly competitive tradeable industries. But it cannot be generalised to a continental economy, such as the eurozone.
What works for Germany cannot work for an economy three times as large and far more closed to external trade.
The Germans have a name for their unique economic framework: ordoliberalism
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