Just a quick chart that I think illustrates the problem of German non-reciprocity especially clearly.

Remember, during the years before 2007, we saw immense imbalances emerge within Europe, with Germany moving into massive surplus while Spain and others moved into massive deficit. Then it became necessary to unwind these imbalances, with much moralizing from the Germans to the effect that others should be able to do what they did.

But Germany operated in a highly favorable external environment, with fairly high inflation in southern Europe allowing it to make big gains in competitiveness — in effect, internal devaluation — without needing deflation. Unfortunately, Spain isn’t being offered the same kind of chance. Here’s inflation rates in two periods, as measured by GDP deflators (I chose that because it was easiest to pull up from the IMF database; it won’t matter much if you use another measure):

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Spain has actually had lower inflation post-crisis than Germany did pre-crisis — but it hasn’t achieved much gain in competitiveness, because German and overall Eurozone inflation have been so low.

This is a huge failure of policy.