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Germany Can Reduce Its External Surplus

For years, Germany's ballooning current-account surplus has rankled the rest of the world, and German policymakers have thrown up their hands as if powerless to do anything about it. But the external imbalance is a result of policies that are fully within the government's power to change.

MUNICH – At just below 8% of GDP, Germany’s current-account surplus is the highest of any country in the world. Since the 2008 financial crisis, the size of the German surplus has raised hackles around the world, and it remains a topic of concern at the International Monetary Fund and other global institutions.

Nonetheless, early this year, Economy Minister Peter Altmaier’s Scientific Advisory Council published a report with a conclusion that is nothing short of astonishing: Germany, the report says, has no available instruments to reduce its massive external imbalance.

That finding comes after repeated complaints about the German surplus from US President Donald Trump’s administration, which has threatened to impose import tariffs and other protectionist measures. Even during former President Barack Obama’s administration, the United States repeatedly called on the German government to reduce its surplus. More recently, the G20 made “global imbalances” one of its central areas of concern.

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