

Source: Christian Odendahl

Europe has a Germany problem.

Specifically, it has a Germany-not-spending-enough-money problem. But German workers can't afford to spend more money themselves, because, after inflation, they haven't gotten much of a raise the past decade. It's the German government that chooses not to, even though it needs new infrastructure -- and investors, as crazy as it sounds, have been paying it to borrow over two years. You can see just how starved Germany has been for public investment—things like roads, bridges, and schools—in the chart above from Centre for European Reform chief economist Christian Odendahl. After accounting for wear and tear, the government's investment in the economy has actually been negative for 12 years now.

Germany, in other words, also has a Germany-not-spending-enough-money problem. It's running down its infrastructure without replacing it — and at a time when its own economy is stuck in the doldrums. That, as the IMF has pointed out, is incredibly short-sighted, since infrastructure spending would boost the economy today and boost its economic growth tomorrow. Which is why the normally tight-fisted IMF and ECB have both implored Germany to break its vow of austerity, and start spending more for its own, and Europe's, good.

Well, Germany has finally changed its mind. Instead of doing nothing, it's going to do slightly more than nothing. It's going to increase its infrastructure spending by €10 billion, or $12.4 billion, over the next three years — and that's it. To put that in perspective, that's just 0.1 percent of gross domestic product. That's not a stimulus. That's a rounding error. But it's the most Germany is willing to do so, since it's determined to balance its budget in 2015.

So Germany will keep stagnating, and the rest of Europe, which desperately needs Teutonic demand, will too.

What's the German word for penny-wise and pound-foolish?