April 2014        

Trade in the euro area, 2010–2015


There was a major increase in the annual surpluses of the surplus countries between 2000 and 2009 and between 2010 and 2015, as can be seen in table 1. The mean for the countries was up from 4.2 to 6.8 per cent.
      Germany was one of the drivers of this increase, up from 3.8 to 6.6 per cent, with the Netherlands up from 6.5 to 8.5 per cent. The cumulative surplus for six years was close to the total for 2000–2009, €1376.9 billion, compared with €1,478.4 billion. On a ten-year basis, the surplus for 2010–2015, if current trends continue, will be €2296.9 billion—up 50 per cent on the 2000–2009 period.
      Only Finland went from surplus to deficit in the latter period. This may be due to problems at Nokia, which is affected by the increase in use of smartphones.
Table 1: Balance of payments, creditor/surplus countries, 2010–2015
Average surplus or deficit, 2000–2009Average surplus or deficit, 2010–2015Cumulative surplus, 2000–2009Cumulative surplus, 2010–2015
Germany3.8%6.6%€887.4 billion€1,076.6 billion
Netherlands6.5%8.5%€332.2 billion€238.9 billion
Belgium4.3%0.9%€127.8 billion€17.3 billion
Austria2.2%2.6%€57.7 billion€37.2 billion
Finland5.3%–0.9%€45.2 billion–€8.3 billion
Luxembourg9.7%6.8%€28.2 billion€15.1 billion
Mean4.2%6.8%€1,478.4 billion€1,376.9 billion (10 years: €2,296.9 billion)
Source: Statistical annex to European Economy, autumn 2013; statistical annex to European Economy, spring 2010.

France

France’s balance of payments worsened in the second period. The deficit increased from –0.2 to –1.9 per cent, from –€59.4 billion to –€231.5 billion. If the trend for 2010–2015 continued for ten years the deficit would be –€385.3. This would give an increase of approximately 550 per cent over the decade 2000–2009.
      The French fiscal deficit exceeded the EU limit of 3 per cent of GDP (output), and the French government was forced by the EU Commission to get the deficit below the limit, either by cutting government spending or increasing taxes, or both.
Table 2: Balance of payments, France, 2010–2015
Average surplus or deficit, 2000–2009Average surplus or deficit, 2010–2015Cumulative surplus or deficit, 2000–2009Cumulative surplus or deficit, 2010–2015
–0.2%–1.9%–€59.4 billion–€231.5 billion (10 years: –€385.3 billion)

Debtor countries

The debtor countries’ deficit decreased significantly, from –€1,030.3 billion in 2000–2009 to –€188.2 billion in 2010–2015 (–€313.3 on a ten-year basis.). As a percentage it fell from –2.9 to –1.0 per cent.
      The deficits fell because of austerity policies imposed on the debtor countries when they exceeded the 3 per cent rule. (See the next article in this series.) The cuts in government spending and increases in taxes imposed on the debtor countries reduced domestic demand, consumer spending, and investment spending. This reduced Imports, and so the balance of payments improved.
      These austerity policies caused a major reduction in the standard of living, which is based on consumer spending and government spending and the levels of taxation in all these countries.
Table 3: Balance of payments, deficit/debtor countries, 2010–2015
Average surplus or deficit, 2000–2009Average surplus or deficit, 2010–2015Cumulative surplus or deficit, 2000–2009Cumulative surplus or deficit, 2010–2015
Italy–1%–.6%–€150.5 billion–€58.5 billion
Spain–6.3%–.4%–€579 billion–€62.5 billion
Portugal–9.7%–2.8%–€149.1 billion–€29.1 billion
Greece–13.3%–5.9%–€115.5 billion–€73.3 billion
Ireland–2.2%3.4%–€36.2 billion€34.2 billion
Mean–2.9%–1.0%–€1,030.3 billion–€188.2 billion (10 years: –€313.3 billion)

Overall surplus

The net surplus of the twelve countries increased from €388.7 billion in 2000–2009 to €1,057.2 billion from 2010 to 2015 (€1,911.6 over ten years). The main driver in this massive increase was Germany, up from €887.4 billion to €1,076.6 billion (€1,794.3 billion), an increase of more than 100 per cent. There are two reasons for this:
      (1) The euro was, and is, more undervalued than in the period 2000–2009 with respect to the surplus countries, especially Germany and the Netherlands, in the period 2010–2015. This led to larger surpluses in the latter period and caused rising concern in the International Monetary Fund, the United States, and the EU Commission.
Table 4
Cumulative surplus or deficit, 2000–2009Cumulative surplus or deficit, 2010–2015
France and debtor countries–€1,089.7 billion–€319.7 billion (10 years: –€385.3)
Creditor countries€1,478.4 billion€1,376.9 billion (10 years: €2,296.9)
Net surplus, twelve countries€388.7 billion€1,057.2 billion (10 years: €1,911.6 billion)
      (2) France and the deficit countries reduced their trade deficits, because they were forced to cut their fiscal deficits, as they had excessive fiscal deficits according to the excessive-deficit EU rule.
      This article shows that there are two distinct areas within the euro zone, and that these areas are incompatible in their membership of the euro. [KC]

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