German surplus at risk – BNPP

In view of the analysts at BNP Paribas, a key issue for the Eurozone is the German current-account surplus which is over 8% of GDP in 2016.

Key Quotes

“Before the Eurozone crisis, Germany’s surplus was offset by deficits of other countries, so the bloc’s average current account was balanced from 2002 to 2011. Since the crisis, however, non-German Eurozone domestic demand has been squeezed and competitiveness has improved, contributing to a big improvement in the Eurozone’s trade and current-account position.” 

“Essentially, the big internal Eurozone imbalance – a large current-account surplus in Germany and some other core countries, offset by large deficits in the periphery – has morphed into a large external imbalance, with the Eurozone running a surplus of over 3% of GDP last year. The US stance is likely to be that Germany needs to raise investment and cut savings, but this will have to wait until after September’s general election.”