Paul Krugman: The German problem

The German problem: A brief note on real economic issues. Everyone here seems to be talking about two things: the fate of the auto industry, which is in almost as much trouble in Sweden as it is in the United States, and the German problem. At a time when expansionary policies are desperately needed, the leaders of Europe’s largest economy seem to have their heads in the sand. This is a huge problem: there are large spillovers in fiscal policy among EU nations — that is, a significant fraction of, say, French fiscal expansion ends up promoting employment in Germany or Italy rather than France. So there’s a crying need for a coordinated policy. But the Germans aren’t participating.

Much more on this when I have time.