Intentionally or unintentionally, Germany’s latest announcement about spending cuts for a more balanced budget sets precedence for other eurozone countries where growth and austerity are usually at odds.
There’s a lot that makes the German economy stand out. The first is a highly-skilled labour force, which is the result of a strong focus on technical and vocational training, right from upper secondary school. Further, Germany is known for its remarkable manufacturing prowess that makes the country the world’s second largest exporter, with a much diversified export market.
What’s more is that being a part of the eurozone allows Germany to work with a relatively weaker currency, which increases its export competitiveness. All in all, these strengths do make it easier for Germany to announce spending cuts and aim for a budget balance in 2015.
For other eurozone economies, however, all’s not that easy and striking economic asymmetry between eurozone countries cannot be ignored. That’s why a die-hard love for austerity may not be an ideal solution for other eurozone economies that will need some stimulus to boost growth to some extent at the least.
Having said that, cutting down on expenditures by following Germany’s lead could help bring the debt burden and budget deficit under control too. As an alternate, countries need to work towards improving productivity of their industries and labour force. Needless to say, bringing the financial house in order is a very dire need at the moment, more than any stimulus policy.
So, while astute spending measures, such as on capital expenditures – such as for the betterment of industrial growth – are a good idea, consumption expenditures, such as those on public wages, does not seem like a prescription that would work with eurozone economies’ chronic fiscal ailment.
So, while Germany has its own share of benefits of being in the eurozone, that of a weaker currency to be precise, it offers something for other eurozone countries too. It’s a shining example for the rest to understand and take heed to, especially if they wish to get a grip on their fiscal situation.

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