Germany and California: Parallel Crises in Need of Parallel Remedies

Although Germany and California represent different levels of government, both are facing similar severe economic and political crises. The economic problems for both stem from the collapse of the booming information technology sector. Global trade and investment opportunities connected the information technology sectors in Germany and California, and the collapse of the IT sector in California has had devastating effects on the German economy. This article in the International Herald Tribune argues that despite shared economic woes, differences in the larger institutional settings in Germany and California necessitate different solutions. Through the Federal Reserve, the US government can at least provide a short term solution to California's economic problems, but in the long-run the state will have to raise taxes and cut spending, says the author. The European Central Bank, on the other hand, is notoriously deficit weary, and will be less amenable to coming to Germany's rescue anytime soon. Nonetheless, the author notes, "Germany's solution lies in changing national fiscal policy and European Monetary Union policy, which may be politically possible if Europe's malaise continues. " – YaleGlobal