EU Economy
European Commission opens review of Germany's current account surplus - - Part 1
By Michael Hennigan, Finfacts founder and editor
Nov 14, 2013 - 9:30 AM

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Olli Rehn, commissioner in charge of Economic and Monetary Affairs and the Euro, José Manuel Barroso, president of the EC, and László Andor, commissioner in charge of Employment, Social Affairs and Inclusion, at a press conference, Brussels, Nov 13, 2013.

The European Commission on Wednesday announced that it would open an in-depth review of the German current account surplus - -  a measure that includes the goods exports surplus, the services deficit and financial movements  --  saying it will examine whether the Eurozone's biggest member should be doing more to boost domestic consumption and investment to help the Eurozone economy.

In 2012, Germany had a current account balance of 7% of GDP (gross domestic product)  and a 3-year average of 6.5% compared with a deficit of 1.8% in France - -   see Commission table [pdf].

In Part 2 of this report on, we analyse the German exports miracle and issues that have been raised on its impact in the rest of the single currency area.

Analysis: Germany's current account surplus - - Part 2

German monthly import data published by Destatis, the federal statistics office, is confusing and imports shipped through the Dutch port of Rotterdam are booked as sourced in the Netherlands and therefore published in the English language release as originating in the Eurozone (without any caveat) but after the year end they are adjusted by allocated the Dutch import values to the original country of shipment.

Zsolt Darvas, an economist at the Brussels-based think-tank suggests that German goods trade with the rest of the Eurozone is in balance

The Eurozone accounted for about a third of the current account surplus of €185.5bn in 2012.

José Manuel Barroso, president of the EC, said at a press conference on Wednesday:

The figures show that Germany has posted a high and persistent current account surplus, even if it is true that most of this current account surplus is not with European countries, not with the euro area countries. A high surplus does not necessarily mean that there is an imbalance. But we do need to examine this further and understand whether the high surplus in Germany is something that is affecting the functioning of the European economy as a whole. This is not about questioning Germany’s competitiveness, no, because I want to make it clear: the real problem for Europe is not that Germany is very competitive, this is indeed a major asset for the economy of Europe as a whole. The problem is much more that others are still far away from that level of competitiveness. So as I was saying, our problem is, of course it could never be the German competitiveness, but whether Germany, the European Union's economic powerhouse, could do more to help the rebalancing of the European Union economy. That is why we have been recommending, already for several years, that Germany supports the domestic demand and investment, for example by opening up its service sector."

The European Commission also said it would open in-depth reviews of 15 other EU economies, including France, Italy and Spain. The reviews are part of new rules to help the EU identify macroeconomic "imbalances" - - such as a large trade deficits or potential housing bubbles.

The contrasting fortunes of the Eurozone's two biggest members were illustrated this month when trade data was published for September.

Germany's trade surplus rose to €18.8bn from €15.8bn in August, when adjusted for seasonal and calendar effects. France's trade deficit widened to €5.8bn in September from €5.1bn in August. BNP Paribas predicts that France's GDP will be flat in the third quarter compared with the preceding period.

France has run a trade deficit every year since 2002.

In 2012 Germany exported goods worth €1.095tn and imported goods worth €905.9bn. That means that Germany's exports increased by 3.3% and its imports by 0.4% in 2012 compared with 2011. In 2012 the foreign trade balance closed with a surplus of €189.8bn. In 2011 the foreign trade balance surplus amounted to +€158.7bn.

The current account of the balance of payment - -  according to provisional calculations of Deutsche Bundesbank, the centarl bank - - closed with a surplus of €185.5bn.

According to Destatis, the federal statistics office, about 69% of exports of goods "made in Germany" were shipped in 2012 to European countries. 57% of all goods were delivered to the member states of the European Union. The second important sales market for German goods in 2012 was Asia with a share of about 16%, followed by America, with a share of approximately 12%. Africa and Australia / Oceania only accounted for small percentages of German exports (2% and 1%, respectively).

The majority of German imports also came from Europe (70%), followed by Asia (19%) and America (9%). Goods from Africa and Australia / Oceania played just a subordinate role in imports too (3% and 0.4%, respectively).

In 2012 the top country of destination for German exports was France followed by the United States and the United Kingdom. Germany exported goods worth €102.9bn to France (9.4% of total German exports), €87.0bn to the United States (7.9%) and €73.3bn to the United Kingdom (6.7%).

Most of the goods imported to Germany originated from the Netherlands. The countries ranking second and third were the China and France. Germany imported goods worth €85.7bn euro from the Netherlands (9.5% of total German imports), €78.5bn from China (8.7%) and €64.0bn from France (7.1%).

Some economists argue that a further rise in German domestic demand, and thus its imports, wouldn't do much to help the rest of the Eurozone.

"I don't think this argument is particularly watertight," said Jens Weidmann, president of the Bundesbank, in a speech Wednesday. "The positive spillover effects would be minimal."

Germany's high surplus was "largely with countries outside the single currency area," he said. "The surplus with the euro zone has been narrowed by half between 2009 and 2012."

Germany should import more from other European countries, the French business paper Les Echos writes: "The EU Commission wants to begin today with a far-reaching analysis of Germany's economic situation, the way it normally does with ailing economies. Unlike these countries Germany is in top form economically, with very competitive companies and a large export surplus that has stood at over six percent of its GDP for years now. And that's just why Brussels wants to intervene. One country's loss is the others' gain. You can't demand that the countries in Southern Europe lower their deficits if the North won't reduce its surpluses. Nevertheless, Germany's surpluses are really more of a global than a European problem. The Federal Republic only racks up a quarter of its surpluses with the countries of the Eurozone."

Ranking of Germany's merchandise trade partners [pdf]

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