As Donato Di Carlo rightly points out, the scale of the imbalances within the eurozone has been at the core of the academic and political debate. The most common criticism of Germany’s excessive surpluses usually refers to the wage restraint policies that the government implemented from the onset of EMU in the late 1990s.
With unit labor costs undercutting the inflation target set by the European Central Bank (ECB), Germany has amassed substantial gains in its price competitiveness through an effective depreciation of its real exchange rate.
This, in turn, enabled an accumulation of surpluses, which would have been impossible under a fluctuating exchange rate regime and an appreciating currency.
The problematic implications of the competitive divergences across the eurozone are generally well understood.
Now, the question about its viability hinges upon the rectification of the accumulated imbalances.