Courtesy of Mish.
Germany’s current account surplus has reached six percent, an amount that bureaucrats in Brussels have decided is a threat to the entire continent. The EU commission will likely issue a warning to Germany with threats of sanctions if Germany does nothing about it.
I picked up this story from Eurointelligence which writes “FT Deutschland reports that Germany’s current account surplus is likely to exceed 6% of GDP this year, the threshold which triggers a European Commission warning. The German government maintained its position that there was no problem with current account surpluses. On the contrary, the German economics ministry sees this a “very positive” development. The German government spokesman said yesterday that the problem of imbalances was a problem for a countries with large current account deficits.”
Mathematical Insanity
Got that? Allegedly, large deficits are a problem but large surpluses are not.
Given that surpluses and deficits must net to zero, the position that only deficits are a problem is ludicrous. Mathematically, both are problems or neither are problems, because you cannot have one without the other.
Bear in mind it was not Eurointelligence that took a mathematically ludicrous position, but rather articles they referenced.
Germany’s Surplus Could Trigger Collection Procedures
Let’s take a look at the Financial Times Deutschland article referenced above (translated from German and further modified by me for ease in reading)
This year Germany recorded its highest trade surplus ever. This could crumble into the Federal Republic 2013 EU-collection procedures.
The new macro-economic early warning system in Europe provides that a current account surplus over 6.0 percent of gross domestic product is a threat to the economic stability of the continent.
The EU urges its members not to allow imports and exports fall apart too far. The early warning system developed Brussels to name mistakes and sanction if necessary. Since this year can be monitored in addition to the current account including private and public debt and the development of the real estate markets.
As part of the EU early warning system Luxembourg and Sweden also have excessive surpluses. In Luxembourg, the current account surplus in 2011 was 6.4 percent of economic output – approximately $4 billion. For the same year, Germany had a surplus of over $200 billion.
Only Deficits a Problem Says Frankfurter Allgemeine
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