Monday, March 18, 2013

Eurozone Trade Balance

Ugh - as commenters noted, I misread this graph and the post below is entirely wrong.  Apologies for the sloppiness.

One thing worth noting about the European mess (in addition to the latest trouble with Cyprus) is that Europe has been running a noticeable trade deficit for the last couple of years (chart above).  This isn't a long term structural situation, but is more likely due to the fact that the ECB hasn't reduced interest rates as much as other major central banks.  This in turn makes the Euro stronger than it otherwise would be, which makes European exports more expensive, and makes foreign imports more attractive to European citizens.

Obviously, this isn't helpful to Europe's recovery.


Stephen Smith said...

The Austrians have proven once more how efficiently and effectively they can push the world into depression.

They should all be driving cars with fins and eating deserts made from gelatin.

Next year, the austerity pushers will talk up how their economy will finally turn around because they are offering better 'service'.

They have cannibalized their economy and even in the event that they were right, it will be too late for them to make up for lost ground.

Greg said...


if I'm reading that chart correctly, exports are higher than imports, so the Euro Area (EA17, as they call it) has been running a small trade surplus for the last couple of years. Contrast that chart to the EU-27 chart immediately below it.

Looking more closely, the trade balance is made up of a large German surplus offset by an excess of imports in most other Eurozone countries. Austerity is forcing many of those countries to import less: in absolute numbers in some cases, as a percentage of exports in others.

* * *

Cyprus: In essence it seems that European bankers have casually decided to get rid of one of the key protections of the banking system, a cast-iron deposit guarantee for small depositors, in the hope of preventing a small political party in Germany (the FDP) from falling below the 5% vote threshold which gives it seats in the Bundestag.

The insistence that "this is not a precedent" will surely be taken by most people as apophasis - the rhetorical device of implicitly affirming something by pretending to deny it. Estimate of long-run growth in Europe must move down several notches as a result of this weekend's work.

* * *

Reading around on the Cyprus thing, something that cropped up is conjecture/rumor that Germany is preparing to implement internal austerity after its elections. Germany has been in breach of the Maastricht Treaty limits of 3% government deficit and 60% debt for some years now.

The thinking is that German elites will use the excuse of protecting themselves against accusations of hypocrisy to inflict more suffering on more poor people in Europe.

If it all happens, I don't think it will end well.

Luis GarcĂ­a said...

I guess I am not getting it right but on the graph I see exports higher than imports and positive balance for the last 15 months or so. Maybe some clarification is needed (or maybe I'm just getting it wrong and it's only my fault).

Alexander Ac said...


check out the PDF file with trade deficit of EU27 countries.


your conclusion does not hold with the data, since trade deficit is trending smaller!

Also, if everybody reduces interest rates and currency value, what would be the difference?

In other worlds, our declining oil cinsumption enables increasing oil consumption elswhere (Chindia) - global economy has become zero-sum game, and will become negative-sum game soon, IMHO,



James said...

Can you imagine if journalists, when they got a story wrong, left the story up on the newspapers website with the incorrect parts crossed out and an apology at the top?

A guy can dream.

You are a class act, Stuart.

Unknown said...


Do not be so quick to delete your observations. When one reads the entire report you see that there are two groups of European countries. One group is the EA17 which I believe consists of the 17 countries that have adopted the Euro as currency. There is then the second, and larger, group EU27 which is the larger European Union. The EU27 are shown on a separate graph and indeed have a negative trade balance, although that negative trade balance trend is shrinking over the past two years.

The largest difference between the two groupings is the United Kindgom which is part of the European Union but not part of the Euro Area.

And it is even more complicated than that. Norway, Switzerland and Russia are not included in either listing since they are not part of the European Union but would most likely be considered part of Europe.

Then look at the breakout chart by country and it is possible to see why Germany is just getting fed up with the rest Europe and also why the rest of Europe is not all that happy with Germany. Germany exports more than essentially then next three largest exporting countries combined but they do not consume. So they have the largest trade surplus by far, 187 bn Euro for 2012 which is higher than the combined trade surpluses of all the other EU27 countries that have trade surpluses, 151 bn Euro.

Germany is doing much better, a couple of other countries are doing a bit better, but the majority of Europe is doing very poorly. Germany takes a bit of a moralistic approach to the rest of European financial problems by saying that the rest of Europe should do as Germany does. Unfortunately world trade (and to a smaller extent inter-European trade) is a zero sum enterprise. All countries cannot have export trade surpluses and when one country essentially refuses to increase their imports it makes it difficult if not impossible for other countries to increase their exports.