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5 Facts: Does Germany Deflate the Rest of Europe?

France’s cost of labor and goods is actually on track with EU goals. Germany’s is way out of line.

December 4, 2014

Credit: Ronnie Chua -

1. Since the euro came into existence in 1999, the cost of goods and services in France has risen 1.7% per year.

2. Meanwhile, its unit labor costs have risen 1.9% annually.

3. Both numbers are in line with the European Central Bank’s target of slightly under 2% inflation.

4. The United States has seen a similar level of inflation.

5. Germany, on the other hand, has seen price and labor-cost growth of just 1 and 0.5%, respectively.

Source: Being Bad Europeans by Paul Krugman (New York Times, November 30, 2014)


While most of Europe seems to be hitting their inflation targets, Germany fails to do so.

Germany is exporting deflation to its neighbors.

It's not that Europe has to worry about rising inflation. In fact, Germany has too little of it.