Flash: Germany continues to serve critical role in crisis management – Goldman Sachs

FXstreet.com (Barcelona) - General elections will be held in Germany at the end of September and the election campaign is heating up.

According to the Economics Research Team at Goldman Sachs, “Given Germany’s pivotal role in the management of the Euro area crisis, the outcome of the election will shape the overall policy response and thus how Europe’s economy and institutional architecture evolve.”

The main focus of the German government’s response to the crisis has been to reform the institutional framework such that a repeat of the crisis would become, if not impossible, at least less likely. With respect to the question of how to overcome the current crisis, the German authorities have been much more hesitant about allowing changes to the existing framework, such as an outright mutualization of sovereign debt, that would ease the funding problems in the periphery. Instead, it has emphasized the need for adjustment at the national level (in particular, fiscal consolidation).