Nowadays, Germany is accused by Krugman that it does not offer any help to the PIIGS and forces austerity on those countries, which is called “beggar their neighbors”. As a member of the Euro, each country has the same currency, so the PIIGS could borrow at low interest rates before to pump up public spending. However, they could no longer borrow after the financial crisis and face much unemployment now. Therefore, Krugman blamed all of these issues on Germany.
Although Germany forced the PIIGS to spend less and pay more taxes, which made a worse situation, Germany did not beggar their neighbor. As Germany increased its imports to the PIIGS and reduced its exports, it actually contributed to the growth of PIIGS but beggared the countries like China, Brazil and Russia. What is more, Germany’s average imports from the PIIGS between 2007 and 2012 equal 3.5 percent of GDP, which has little impact on PIIGS’s economies, let alone on the whole world.
Therefore, the Krugman German bashing argument is silly and obviously wrong as Krugmans draw conclusions before examining facts and the argument does not make any sense.