U.S. Secretary of the Treasury Jack Lew traveled to Germany this week to promote the Obama administration’s views on what the new government in Berlin should do in order to promote growth in the European Union. In essence, Lew asked his German counterpart, Wolfgang Schäuble, to forget fiscal austerity, stimulate domestic demand and, thus, reduce Germany’s vast current account surplus.
As with other similar expeditions to Berlin undertaken by his predecessor, Timothy Geithner, Lew travels back to Washington not having accomplished much. The German government remains adamant in stressing that it is already doing the right thing for Germany and Europe. On Thursday, the President of the European Central Bank, Mario Draghi, an Italian, offered his support to Berlin saying that he never understood how weakening one country artificially would make other European countries stronger. However, he also stressed that where public investments are necessary to make the German economy more resilient, they should be made.
AICGS Senior Fellow and Director of its Business & Economics Program Alexander Privitera recently published an article for the European Institute on the ongoing fight between Washington and Berlin and argues that the rift reflects a deep misunderstanding on the very nature of the recent crisis.