Aberrations and Confusions with the Current Account Statistics

Abstract

In the actual situation of the crisis of the member countries of the Eurozone the current account surplus and deficit position of single member countries has been considered to be key indicator of the internal imbalances of the Eurozone. Germany current account surplus is confronted with the current account deficits of the PIIGS-countries. Some authors claim that they are mirroring the imbalances with Germany as the leading surplus country opposite the other deficit countries. From this one concludes that Germany is the main cause for the current crisis of the Eurozone because it has become too competitive. However, the different authors like IMK or Flassbeck make a major mistake. They do not compare the bilateral current account balances between the single countries but the total current account balances. This leads to incorrect conclusions. Taking the balance of payment statistic of the German Bundesbank one observes that in the year 2010 the total surplus was 141 bill. Euro. Only 25 bill. Euro is attributable to the PIIGS-Countries, i.e. the share is only 15 percent of the German current account surplus. As well the current account surplus of Germany opposite their countries has rapidly decreased since the outbreak of the global economic and financial crisis. It has been nearly cut in half for the PIIGS-countries. A key factor for this turnaround has been the drastic recession of these countries. Furthermore the near zero interest rate policy of the ECB has drastically reduced the interest payments from these countries to Germany. Through this channel Germany as a major creditor country contributes as well by this to the reduction of the current account deficit of these countries. Changes in the current account have a multitude of causes and directions. One has to look closer to the details to understand what is going on, Simple aggregate surplus/deficit comparisons are often highly misleading.