This is incorrect. The EU has substantial transfer payments. Wealthier EU countries (like Germany) subsidise poorer ones (like Poland) on the order of tens of billions of Euros annually.
Regional development (subsidies for poorer areas) is the second largest EU budget line item after agriculture.
What's more, Germany may even have a built-in advantage datinng back to the inception of the euro, when the Deutsche Mark was brought into the union at what many believe was about a 6% undervalued rate. "Updated IMF data suggests that by 2017 the German pricing edge built into the euro had about doubled to over 12%."[1]
https://www.forbes.com/sites/miltonezrati/2018/01/23/the-ger...
It is meaningless to compare a net transfer to gross tax receipts. California's large, wealthy population generates high federal tax receipts, but it's net contribution is actually negative because the federal government currently spends more in California than it receives in taxes.
Source: https://www.governing.com/week-in-finance/gov-taxpayers-10-s...
[1]: https://rockinst.org/wp-content/uploads/2018/02/2017-09-28_B...
Everyone appears to use the short billion these days, and it caused me significant cognitive dissonance!
The Eurozone should either go all the way like the US, or they should scrap the currency union. This halfway step only serves the wealthy.
On the other hand, Slowakia and Ireland are part of the Eurozone and are doing very well despite starting out poor. (Maybe Ireland doesn't fit here, because they've been doing very well since long before the Euro.)
The EU consists of independent, co-operating countries. This is quite different from the US. There is very little the EU can do without votes from the individual countries.
So the assumption is that a country that joins the Euro has carefully evaluated the pros and cons. At the same time, the amount of subsidies a country receives is not dependant on that country being part of the Euro-zone or not.
If you look at the Euro at the time of introduction, then there was every intent to make Euro as strong and stable as the Deutche Mark. Very much so against the wishes of France, who wanted a currency that was way more subject to political control.
Of course, one incentive for countries to adopt the Euro was exactly was the article is about: a small currency stands no chance against investors speculating against it. Better hide in a big currency.
How?
Poorer countries in general have lower productivity (possible causes can be lacking infrastructure (roads, electricity, telecom, but also regulations etc.), lacking capital, lacking foresight/lacking capital to invest in future tech by the governement (e.g. broadband internet)).
This results - despite lower wages! - in higher unit labor costs.
If you form a monetary union with poorer and richer countries (like the EU), you have problem. The richer countries, despite higher absolute wages, will have lower unit labor costs. The richer countries can therefore expand exports at the cost of domestic production in the poorer countries (e.g. Germany vs. rest of EU).
If the poorer country wouldn't be part of the union, it could (among other things) lower the value of its own currency (or the forex markets would do that). Lower-valued domestic currency assists exports, which levels competition with the richer countries a bit.
This doesn't mean that there are no alternatives inside the current EU! They just haven't been implemented yet. Options would be
* way higher minimum wages in the rich countries (Germany was one of the last countries in Europe to implement them)
* implementing less union-hostile laws in the richer countries (resulting again in higher wages, but also for higher income groups not affected by minimum wage)
* More infrastructure investments in the poorer countries (there already are significant transfers, but more would help)
* A unified fiscal strategy. After implementation of the Euro zone, there were massive capital inflows into the poorer countries, resulting in overvaluation of the local economy. This was a big reason for the local problems of the last decade [1]
[1] https://streetlightblog.blogspot.com/2011/09/what-really-cau...
In areas where countries like Germany directly compete with poorer countries, they do so by having more and better automation. Productivity is not that people work harder, is it that there are more machines to do the work.
The net effect of raising wages is that there will be more automation, largely negating the increase in wages. By it self this is not a problem.
Where is goes wrong is that within a country, there are many jobs that cannot be automated easily. In particular, with an aging population, you need lots of nurses and other care takers.
Increasing minimum wages with sole goal of reducing export imbalance can make those cost go through the roof, and generally lower the standard of living for a large part of the population.
Reducing the cost of 'care' and other jobs that dependent on personal service, is already very important to improve the standard of living.
But when looking at countries it is very important to not only look at wages as cost. Especially in Germany the low wages result in low domestic demand, which results in the country being a net exporter again and again.
Rising wages, especially minimum wages, are mostly spent domestically on services (think going to the hairdresser instead of cutting your own hair, or finally using healthcare as needed).
Germany was a wonderful field experiment for exactly this in the last years, as it was one of the two countries out of 27 European countries not having minimum wage laws. After implementing minimum wage (starting at 7€ something, now at 9.20€/h) pretty much zero job loss could be observed, depending on market segment quite the opposite. Because wages are not only costs, but also create demand.
In Germany, the lower 60%(!) of the population only hold 3% of the wealth. In other words: Almost every € earned gets spent on consumption. If those people earn more money, they spend more money, thus creating demand.
Automation is a real thing, but then again what gets automated aren't those low wage jobs in the service economy - it's mostly work in higher income brackets. And the automation can result in severe disruption in local market segments, but overall it doesn't result in less employment - see yearly productivity growth and employment rates of most industrialized economies. Just look at the United States, which currently has nearly full employment despite currently being the world center of (software) automation.
Even before minimum wages, Germany has very high sector-level minimum wage due to union tarrifs that are binding for non-union employees. Job losses were negligible because the number of people that have been affected by the minimum wage was rather small.
> the lower 60% of the population only hold 3% of the wealth.
Germany has state pensions that you can live on comfortably, and renter-friendly housing laws. So people don't need to own a house as a retirement plan (unlike much of the rest of the world).
True! Those were for the "high-paying" low wage jobs, though - mostly in construction. Gastronomy, hotel industry, haircutters etc. didn't have those. Wage laws in construction mosty were already at more than 9€/h before country-wide minimum wages were implemented.
I can't really agree on that being the reason for no observed loss of jobs though - there are too many other examples of successful minimum wage laws in other regions where the feared job losses failed to materialize, too [1].
>> the lower 60% of the population only hold 3% of the wealth.
> Germany has state pensions that you can live on comfortably, and renter-friendly housing laws. So people don't need to own a house as a retirement plan (unlike much of the rest of the world).
Yes, my angle was a bit different, though: As middle class and upper class earn more, they can afford to save more. Saving, though, does mean that the money saved doesn't take part in the economy anymore (or at least to a lesser degree).
If a low-wage person gets lets say 100€ more per month, that money will get spent almost completely at places like groceries, haircutters etc. - places that also have relatively low wages, which means those people will also spend the money completely and so on. A rise in minimum wages gets you the most bang for the buck, if your goal is stimulation of domestic demand.
[1] As one example New Jersey in the US: https://www.nytimes.com/2015/07/17/opinion/paul-krugman-libe...
Size of EU budget is about 1 % of EU GDP, so these transfer payments are likely inconsequential as a fiscal mechanism.