Prognos Study Unable to Prove a Negative Impact of a Return to the Deutschmark

Prognos recently published a study that attempts to calculate the benefits of Germany remaining in the euro area. The authors come to the conclusion that these are far greater than the disadvantages, including Germany’s liability for the debts of other euro countries. A central role is played by the export surpluses that have arisen from the real depreciation for Germany at the launch of the euro. Ulrich van Suntum, Center for Applied Economic Research, University of Münster, has taken a critical look at this study, and using a theoretical model of foreign trade has examined the extent to which the real appreciation of a currency is detrimental to the welfare and the labour market of the country involved. His conclusion is that it is not detrimental.