By Tom Fairless and Nina Adam
FRANKFURT -- Germany's top economic officials on Monday defended
the nation's giant foreign surpluses, pushing back against the new
U.S. administration's criticism of German trade policy.
The two-pronged defense follows on the heels of a contentious
meeting of Group of 20 finance officials in Germany, where
frictions between the U.S. and other advanced countries over trade
emerged.
Germany's central bank argued in a report Monday that the
nation's current-account surplus -- a broad measure of its foreign
trade and investment balance -- was likely to fall sharply this
year, and warned it shouldn't be curbed using political tools.
Separately, a group of top economists who advise the federal
government rejected international criticism and pointed the finger
back at America's giant trade deficits.
"Problems can arise on both sides -- surpluses and deficits,"
said Jochen Andritzky, secretary-general at Germany's Council of
Economic Experts, a group of five so-called Wise Men -- one current
member of which is a woman -- who advise Berlin on economic policy.
"It usually becomes a problem if the balance is tilted to one side
over the long term, and the U.S. has been running a deficit for
several decades now."
Germany posted a world-record current-account surplus last year
of $297 billion, versus $245 billion for second-place China,
according to the German economic institute Ifo.
The mammoth figure reflects Germans' propensity to save rather
than consume, a mirror image of the U.S.'s large trade deficits and
low saving rates. It means Germany is accumulating foreign assets,
while the U.S. deficit shows it is borrowing heavily from
abroad.
The Trump administration has been sharply critical of the
trading practices of countries such as China and Germany, which it
accuses of exploiting global trading relationships at America's
expense. Global financial officials meeting in Baden-Baden on
Saturday abandoned longstanding commitments to free and open trade
following pressure from U.S. Treasury Secretary Steven Mnuchin.
The European Union's chief trade official, Cecilia Malmström,
said Monday the Trump administration was sending "worrying signals"
on trade. "We do not agree with those who think the answer is to
raise barriers," Ms. Malmström said in a speech in Toronto during a
trip to Canada, with which the EU reached a trade pact in the fall.
She said the bloc's free-trade talks with the U.S. were in a "deep
freeze."
Germany's persistent surpluses have come under attack from the
European Commission, the European Union's executive arm, which has
urged Berlin to curb them by reforming its cosseted services sector
and investing more in national infrastructure.
The Bundesbank stressed, however, that Germany's foreign surplus
is already shrinking, from 8.75% of gross domestic product in the
first quarter of last year to 7.5% in the fourth quarter. The Wise
Men forecast that the current-account surplus would shrink further
to 7.1% of GDP by 2018.
"There is some reason to believe that Germany's current-account
surplus might have passed its zenith and will shrink markedly in
the current year," the central bank said.
It argued that the surpluses were "the result of numerous,
mainly private economic decisions both domestically and overseas,"
meaning that they "can hardly be steered sensibly using political
tools." Many Germans think it is reasonable for their aging society
to want to save.
Still, the Bundesbank did call for research into policy changes
that could encourage more private investment in Germany, which
would help reduce the surpluses.
Germany's Wise Men took a similar tack. They blamed the surplus
on temporary factors such as lower oil prices, on the nation's
aging population, and on the easy-money policies of the European
Central Bank.
The euro has lost around a quarter of its value against the
dollar over the last three years as a result of policies of the
ECB, which has launched a series of massive stimulus programs aimed
at supporting growth and inflation. Peter Navarro, the head of U.S.
President Donald Trump's National Trade Council, told the Financial
Times in January that the euro's low valuation gave Germany an
advantage over its main trading partners.
Germany's Wise Men hit back on Monday, calling such comments
"totally misguided." America's "extraordinary privilege" of being
able to print dollars, the global reserve currency, has allowed its
government to finance persistently large deficits, Mr. Andritzky
said.
A big increase in government spending -- and government
indebtedness -- could even have a "destabilizing effect" on Germany
and the broader eurozone, they added.
The surplus "does not signal a macroeconomic imbalance," they
said in their latest report on Germany's economy.
Like the Bundesbank, the economists called on Berlin to do more
to enhance Germany's attractiveness to investors, pointing out that
greater investment would help lower the current account
surplus.
--Paul Vieira and David George-Cosh contributed to this
article.
Write to Tom Fairless at tom.fairless@wsj.com and Nina Adam at
nina.adam@wsj.com
(END) Dow Jones Newswires
March 20, 2017 18:30 ET (22:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.