From the Introduction:

At a first glance, in the beginning of 2012 the German economy is in an excellent position despite the turmoil within the euro area (see Table 1 on the next page). In 2011, current accounts have been in surplus since 2002, GDP growth was again at the pre-crisis level, the harmonized unemployment rate was below 6%, and employment did not decrease but increased surprisingly after 2009. Furthermore, in 2011 public deficits were again below the 3% level, prescribed by the European Stability and Growth Pact (SGP), and contrary to other member states of the euro area the interest rates for public debt were decreasing, not rising. This performance is based on an export-led growth model driven by low wage increases at fixed exchange rates within the euro area. It seems that, at least in comparison to most of the other member states of the euro area, Germany has overcome successfully the heavy burdens of the financial market crisis as well as those of the economic crisis afterwards through export-led growth. So in the beginning of 2012, Germany appears as one of the rare prospering economies and solvent anchors within the turbulences of the debt crisis in the euro area.

Against this background, it seems highly recommendable for other member states to follow the German example in order to get out of the current European debt crisis and to return to a positive growth path in the euro area by generating exports and export surpluses. But is this really best practice? And what exactly is the German way? The German government answers the first question with 'yes'. The second it answers with price competitiveness and fiscal discipline of the state, based on strict rules and no bailout for other member states of the European Union. As Chancellor Merkel expresses it in her government statement before the G20 summit on 18th and 19th June 2012 in Mexico: "We can overcome the crisis only in a sustainable way if we address the roots of the crisis: the massive indebtedness and most of all the lacking competitiveness of some member states as well as the lacking reliability and credibility of Europe, which develops if it does not comply with its own rules." (Merkel 2012, translation by the author)

Such a recommendation, however, ignores the drawbacks of the German growth model, both for Germany itself and for the other member states of the euro area. Germany is a large country in a monetary union. In such a situation, a modest development of wages deprives private consumption and thus Gross Domestic Product (GDP) growth. Moreover, other member states in a monetary union have to moderate their wages in order to retain their price competitiveness. Otherwise, they have to face current account deficits due to a loss in exports.

In this contribution, an assessment is given whether the German growth model was beneficial for the country itself and the rest of the monetary union since the introduction of the euro. For this purpose, stylised facts of the German economy after the euro are depicted in comparison to other member states of the euro area. The success of the German growth model is reviewed and its contribution to the emergence of intra-European imbalances is explained. Against this background, the positioning of the German government orienting strictly on fiscal discipline and unilateral adaptation of the countries in crisis is analysed.