Europe’s Economic Misery Has Worked Out Pretty Well for Germany

German Finance Minister Wolfgang Schäuble, who subsists largely on a liquid diet of Greek and Italian tears, attends votes in Berlin on July 17, 2015.

Photo by Sean Gallup/Getty Images

With the finalization of a potential Greek debt deal drawing closer, former Federal Reserve chairman turned blogger Ben Bernanke has a post Friday morning excoriating Europe’s past five years of economic policy in which he chides Germany for more or less sucking the life out of its neighbors. In it, he includes this vivid chart, which should put Southern Europe’s resentments toward Berlin into a bit of perspective. The green line shows us German unemployment sliding below 5 percent. The blue line shows us unemployment in the rest of the eurozone combined, which is stuck above 13 percent.

So the past several years of misery haven’t been so miserable for the Germans. Why criticize them for it? It’s all about the euro and trade.

If Germany still had to rely on its own currency, it would be far more expensive than the euro. That would hurt its ability to export Volkswagens, prescription drugs, and Becks around the world. But, instead, it shares a currency with the eurozone’s many weaker members. That has two big effects. First, it lets German companies sell their products in countries like France, Italy, and Greece, where otherwise consumers might not be able to afford them. Second, it keeps German wares relatively cheap outside of Europe, most importantly in crucial markets like the United States and China.

While Germany has reaped the benefits of euro membership, it hasn’t returned the favor by buying more goods from, say Southern Europe. Instead, by keeping government spending tight, it has basically put a lid on imports. The end result is a massive trade surplus that has left its economy in decent shape while leaving its eurozone compatriots hanging out to dry. Worse yet, it has demanded harsh austerity measures in return for bailouts, which have murdered domestic demand in countries including Greece, making it difficult for them to recover.

So Germany has managed to turn the euro into a mechanism for transferring wealth into its own coffers. As Bernanke notes, it could fix this situation at virtually no cost to itself by borrowing at historically low rates to invest in infrastructure and perhaps by shifting policy to increase worker pay. But, instead, it has obsessively clung to its idea of fiscal prudence—for itself and for the rest Europe. And you can see the results very clearly in the disparate unemployment stats.