Everyone is telling Germans to spend more money but they won’t listen

In normal world, if someone earns lots of money but doesn’t spend too much, people applaud them for it. In international finance world, people call them selfish and tell them to cough up.

In this case, ‘someone’ is Germany and ‘people’ is all the other countries in Europe doing badly, and the international organizations responsible for helping to fix what’s gone wrong.

The reason this dispute is back in the news is because the International Monetary Fund, one of the many orgs involved in helping solve Europe’s economic problems, released another report this week saying Germans really, really need to go shopping.

Why do people care how much Germans spend?

If you asked Germans whether they think the International Monetary Fund’s What's this? opinion on the state of Europe should have anything to do with their personal decisions to save or spend, they’d highly likely say no.

But the reason why other countries do feel like it’s their business is because a lot of German money comes from selling their goods abroad. So other countries are buying German stuff, but because Germans don’t buy much, there isn’t really anywhere for other countries to sell things to, which means they’re spending lots on German products but not earning anything back.

But because governments need to provide jobs for people, they need to produce something – even if there aren’t enough people to buy it – so they start spending more than they earn (or they go into ‘deficit’).

Germans aren’t very convinced by all this. They say they would buy stuff from other countries if it was better quality (ouch), and plus, those other countries could fix their deficit by just producing more efficiently or investing in new industries. (It’s a bit chicken-and-egg, though, because it’s hard to do all that without any money.)

Would it really kill Germans to open up their wallets?

Part of this is a cultural thing – Germans save, and asking them not to for the sake of other European economies isn’t going to be easy (as a German, this author can confirm Germans can also be stubborn.)

But it’s also about how much money Germans have. Considering that it’s is one of the richest countries in the world, people really don’t earn as much as you’d expect.

Germany is fairly unique in that German workers are almost always on the board of the company. You’d think that would mean they’d be sitting there asking for a raise every meeting, but in fact they tend to ask for things like flexible working hours or training in new skills more than pay rises.

The reason they don’t ask for more money is that they’re perfectly aware of how quickly they could be pricing themselves out of the market in comparison to the cheaper labor companies could find in Eastern Europe or China. Because they’re lucky enough to live in a place where workers’ rights and technological know-how is pretty high, they tend ask for better conditions and training over more money.

Is there any kind of middle ground?

The report from the International Monetary Fund had a few concession suggestions for Germans to try and get them to spend at least a little more money and keep a few more Europeans in work.

The main thing they want is to push the German government to give its workers a pay rise. For the last few years, Germany has been preaching a policy of ‘austerity’ in the EU – cutting government spending as much as possible – which includes pay cuts to Southern European workers.

The International Monetary Fund would much rather Germans just gave themselves a pay rise rather than forcing other European countries to give their workers a pay cut, because that would take care of the creating-more-demand thing – but Germans refuse to put themselves in danger of being out-competed by cheaper labor in other parts of the world.

Given that’s pretty unlikely, they’re also proposing ways to make more Germans work longer to earn more money and have less of a reason to save. They’d want Germany to push up the retirement age, for example, so there’s less reason to save and more time to earn.

They also suggested more kindergarten and daycare centers so German women can be in work longer, earn more, and spend more.