A recent publication by the Bundesbank on current account statistics has revised the German current account surplus considerably upwards. Germany’s exports were much larger than it was assumed one year ago. The reform of the stability and growth pact (the so-called “six pack”) introduced a proceeding against macroeconomic imbalances. This procedure includes an early warning system composed of ten indicators.
If the European Commission detects significant imbalances in a member state when indicators exceed a certain threshold, it can propose measures to reduce the excessive imbalance (Excessive Imbalance Procedure). In consequence the member state has to present a plan of action to get a grip on the problem. If the member state does not comply with the Commission’s advice, then financial sanctions can be imposed.
Until now, Germany managed to stay just under or marginally above the early warning system’s threshold of 6 percent of GDP for current account surpluses on three years’ average. Thus intensified investigation and supervision were avoided. According to the latest reports by the Bundesbank, the three years’ average of the Current account surplus now yields at 6.5 percent of GDP. (1)
Sven Giegold, economic and financial spokesperson for the Greens/EFA in the European Parliament, comments the current account statistics announcement:
“Merkel and her government have to take full responsibility as the economic leading country of the Eurozone and deal with the vast German current account surpluses. So far, the German government was able to shuffle off the responsibility because the calculations yielded values such as 5.99%. These ridiculous game around figures has prevented Germany to tackle a serious problem in the real economy.
For years, Germany realised export advantages through a policy og strong wage restraint in comparison to other EMU member states. This kind of policy is not only unfair to employees, it does not comply with common agreements either: While in crisis-countries overran the initially agreed core inflation rate of 2 percent, the prices in Germany rose only by 1 percent. The crisis-hit countries mainly damaged themselves. In contrast Germany’s policy was poison for the other member states whose economies has been put under significant pressure by underpriced products from Germany.
Until today the German government is turning a blind eye on the fact that crisis-torn countries only have a chance of economic recovery if they strengthen their export-sectors. The Commission must represent the European interest: The ambivalent manner of leaving Germany unchallenged for its export oriented policy but imposing warnings and strict reforms on smaller crisis-hit countries must come to an end. It is not acceptable that imbalance procedures are imposed upon countries as e.g. Slovenia with its increased private and public debt while Germany’s excessive surplus remains disregarded.
The Commission has to take off its blind-folds and, at least, has to follow the principle of mathematical logic: Who notices that a super-elevated share of imports by certain countries within a monetary union is harmful, must also acknowledge that super-elevated share of exports is harmful in the same way. Who imposes austerity policy measures on indebted countries, has to demand measures to reduce excessive surpluses as well.
In the context of the “six pack” the Commission, the Parliament and the member states have enacted a proceeding for the reduction of excessive current account surpluses. In the face of the revised figures of the Bundesbank the commission should apply these rules strictly. Bending the rules for Germany is no solution. An imbalance procedure for Merkel’s Government would highlight the problem of excessive current account balances in the political discussion. This is long-overdue: In addition to the necessary steps of fiscal debt reduction, decreasing the imbalances is a basic requirement for every solution of the Euro-crisis.”
(1) The Bundesbank’s Current Account statistics are still provisional. The numbers and figures will be adjusted several times and presumably confirmed in October. The three years’ average is calculated from the following figures:
Current account surplus (Billion €)
GDP (Billion €)
3 years’ average
Gross Deomestic Product: Statistisches Bundesamt: https://www.destatis.de/DE/ZahlenFakten/GesamtwirtschaftUmwelt/VGR/Inlandsprodukt/Tabellen/Gesamtwirtschaft.html
Current Account Surplus: Deutsche Bundesbank: