The European Commission decided to prepare an in depth analysis of Germany’s persistently high current account surplus to find out if it is a sign of a serious imbalance in Europe’s biggest economy.
Germany has had a current account surplus in excess of 6 percent of the gross domestic product since 2007.
In September it reached 19.7 billion euros, or more than 8 percent of last year’s economic output, and was the biggest in the world, beating even China.
This has prompted criticism from the United States and the European Union that the German economy is relying to heavily on exports and that Berlin should pay more attention to raising domestic demand to put growth on a sounder footing.
“In-depth reviews will also be prepared for Germany and Luxembourg in order to better scrutinise their external position and analyse internal developments, and conclude whether either of these countries is experiencing imbalances,” the Commission said in a statement.
But criticizing Germany for the surplus is politically tricky, because EU policy-makers encourage euro zone countries to undertake painful reforms to make themselves more competitive and run a current surplus, rather than a deficit.
The analysis is part of new European Union rules, in place from the end of 2011, that charge the 28-nation’s executive arm with checking that countries do not develop dangerous economic imbalances which could become a problem if left unaddressed.
A current account deficit larger than 4 percent of GDP or a persistently very large surplus above 6 percent are among the warning signs in the Commission’s scoreboard of around 30 economic indicators.
The in-depth review is likely to be finished only in February or March next year.
If comes to the conclusion that the surplus is excessive and therefore harmful to Germany’s and Europe’s economy, the Commission will recommend steps to fix the problem.
If Germany were to ignore such recommendations, it could be a fined 0.1 percent of GDP.
Germany argues it has more than halved its current account surplus with the euro zone as a share of gross domestic product since 2007. (Reuters)