ABSTRACT
The current eurozone is doomed to maintain high trade and current account surpluses, which will provoke currency and trade wars. This situation, difficult or impossible to resolve within the eurozone, will be able to resolve itself automatically after a return to national currencies.
This chapter examines this question from the German perspective as well, as Germany’s current account surplus constitutes the bulk of the eurozone surplus. If Germany itself doesn’t manage to reduce this surplus in a controlled fashion, sooner or later it will happen as a result of changes in its trading partners’ policies or a global economic slowdown. In that case, the German economy may face a hard landing – a recession and growth in unemployment. The authors argue that the proposed strategy for a controlled dismantling of the eurozone will allow Germany to solve the problem of its persistent trade surpluses in a way that’s much gentler and safer than other potential methods. Taking into account the dangerous consequences of a potential crisis in Germany, a safe resolution of German surplus problem is in the interest of the entire European Union.
