Germany's Surpluses Strain Eurozone; Represent Continued Global Imbalances

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The recession that followed the [2007/8] crisis temporarily reduced these imbalances. Spendthrift consumers in deficit countries suddenly found themselves squeezed by joblessness and the evaporation of easy credit: that led to a collapse in imports. But a sustained era of balanced growth failed to emerge. Instead, surpluses in China and Japan rebounded. In recent years Europe has followed, thanks to a big switch from borrowing to saving (see chart). The countries on the periphery donned their sackcloth out of necessity, tightening belts and buying less from abroad than they produced at home. Ageing Europeans in core economies, like Germany and the Netherlands, saved for different reasons, such as preparing for retirement. German government-budget surpluses have piled on top of this glut.

That adds up to a big problem, given the state of the world. Within the euro area, the struggling Mediterranean economies need faster rates of GDP growth to bring down unemployment and stabilise government debt. Germany's enormous surpluses mean that its households are buying less from other countries than they ought to. That hurts the growth prospects of the periphery, and raises the risk of a politically induced break-up.