IMF: Germany's Trade Surplus Increases Trade Tensions

  • Berlin, Germany
  • 7 August 2018
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"Germany's reluctance to reduce its trade surplus contributes to trade tensions and increases the risk of undermining global financial stability," IMF chief economist Maurice Obstfeld said.
"In countries with current account surpluses such as Germany, we see measures that are hesitant, at best, to counter the surplus," he said.
According to the IMF and the European Commission, Germany should boost domestic demand by raising wages and investment to curb global economic imbalances.
Countries with very low current account balances such as the United States should reduce budget deficits and encourage households to save more and gradually adjust their monetary policy," said Obstfeld, whereas "countries with very high balances such as Germany should increase government spending, for example by investing in infrastructure or digitization, so companies invest more at home rather than looking outward."
"The net offshore positions will be more divergent, and this will increase the risk of distortions caused by currency or asset price adjustments in debtor countries, which would hurt everyone," he said. "If there is a sudden adjustment, both debtor and creditor countries will suffer."

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