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Europe to probe German trade surplus

Wednesday, November 13, 2013 - 02:18

Nov 13 - The European Commission has opened an investigation into Germany's trade surplus, to see if it is fuelling economic imbalances. As Joanna Partridge reports it comes as Germany's economic ''wise men'' warned that the country's incoming government needs to ensure new measures like a minimum wage don't hurt growth.

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The independent advisors to Europe's largest economy. Germany's so-called "wise men" - four men and one woman - put out their latest report. They also made sure Chancellor Angela Merkel had a copy. It comes as Merkel's Christian Democrat party and the Social Democrats continue their coalition talks. The advisors sent the government a warning - that certain new economic measures could hurt growth. SOUNDBITE: PRESIDENT OF THE RHINE-WESTPHALIA INSTITUTE FOR ECONOMIC RESEARCH, CHRISTOPH SCHMIDT, SAYING (German): "We don't see the socio-political need, and we don't think it would be well considered to introduce such a high nationwide minimum wage like the one currently being discussed. We don't have a precedent and international examples aren't easily transferrable." The economists fear the minimum wage could put jobs at risk. And they're concerned the new government could introduce more generous pensions. They don't want politicians to move away from the kind of reforms Germany has trumpeted abroad. It's rare to hear these kind of warnings from inside Germany. In the past few weeks, Washington's led complaints that Berlin's reliance on exports is hurting Europe's economic stability and the global economy, and it should try to increase domestic demand. Germany has had a current account surplus above 6% of GDP since 2007, and it rose again to over 8% in September, as exports climbed. Now the European Commission has decided to take a close look at Germany's current account surplus, to see if it is fuelling economic imbalances. SOUNDBITE: EU ECONOMIC AND MONETARY AFFAIRS COMMISSIONER OLLI REHN, SAYING (English): "A persistent high surplus also means that Germans persistently are investing a large part of their savings abroad." Adam Myers from Credit Agricole CIB doesn't think Germany's got a problem. SOUNDBITE: Adam Myers, Senior FX Strategist, Credit Agricole CIB, saying (English): "There's nothing wrong with exporting to the rest of Europe, provided there is strong consumer demand in many of those peripheral economies, obviously in the last couple of years that has not been the case. But as growth improves in countries like Spain, in countries like Portugal, the European Union will rebalance and it will be a very similar relationship to that between China and the United States." The European Commission's analysis is part of new EU rules - it doesn't want to see a surplus above 4%. But it would be politically tricky for the Commission to criticise Germany for exporting too successfully - when it wants others to improve their competitiveness.

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Europe to probe German trade surplus

Wednesday, November 13, 2013 - 02:18