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11/6/15

EU: The End Of German Hegemony – Really? - by Francesco Saraceno

True, Germany’s growth is slowing down. These are the risks of an export-led growth model: countries are not masters of their own fate. Germany stayed clear from the peripheral countries’ crisis (that it contributed to create) by turning to the US and to emerging economies as markets for its exports.

But now that these countries are also having problems the limits of jumping on other countries’ shoulders to grow become evident. I am surprised by Gros’ surprise, as this was evident from the very beginning.

But here I do not want to reiterate my criticisms of the export-led model, starting from the fallacy of composition. Instead, I would like to challenge Gros’ argument that Germany’s influence is waning. I would say on the contrary that the Germanification of the eurozone is almost complete.

I took a few macroeconomic variables and contrasted Germany with the other 11 EMU members. Let’s start with (missing) domestic demand, a defining characteristic of the export-led growth model:

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