But the Eurozone has not given the sort of boost to German exports that many people, including Commission chief Barroso, is now suggesting.
The argument is that Germany has benefitted from the Eurozone through a depreciated currency – that is, the Deutsche mark would have fetch a higher fx rate, which would have depressed German export. Hence, the effect of the euro participation by Greeks, Italians and other Club Med countries was to boost German export – often at their own expense.
The same view has been echoed by French finance minister, Christine Lagarde, and others when they have lambasted German export prowess for causing internal Eurozone imbalances. This view fails on two accounts.
– nominal exchange rate fluctuations don’t drive trade;
– nominal exchange rate is not a good indicator of trade volume growth. One gets better indicators of competitiveness with a real effective exchange rate approach (like unit labour costs), taking account of price-level differences.