Friday, 11 October 2013

What was the cause behind Euro Area's core countries trade surpluses again...?

A very quick post today just to get a simple fact across. I’ve been looking at trade balances for the Euro Area countries the past couple of days.

What was the cause of “core” Euro Area countries trade surpluses according to conventional wisdom? Deficits found in peripherals of course. Well, let’s take a look at the following few charts.

source: Eurostat

Trade balances in all peripherals (bar from Greece for the time being) have not only reversed but have swung to surpluses. Have core countries’ balances reversed and swung to deficits? No they have not.

Here’s the above chart in absolute terms too.

source: Eurostat

I have not included Germany in this one since the sheer scale of its balance would dwarf those of other countries and reduce the chart’s usefulness.

I’ve also summed the trade balances of core countries (i.e.  Austria, Belgium, Germany, Netherlands) and those of peripheral countries (i.e. Greece, Italy, Portugal, Spain) so that the massive rebalancing that has taken/is taking place is more evident.

source: Eurostat, own calculations

It seems to me that core countries’ trade surpluses are still intact despite the massive (and awfully painful at that) rebalancing underway in peripheral countries. 

P.S. In the aggregates above I have not included Finland since its own trade balance deterioration is underway since the early 00s as well as Ireland whose trade balance was always in surplus.

source: Eurostat



  1. You should also mention the Euro Area trade balance that from neutral became positive since the crisis become. Austerity meassures throughout the eurozone led to an increase in competitiveness of the euro area as a whole, but little was done to restore the internal imbalances. Since the inception of the euro and up to 2008 or so, eurozone's balance of trade was neutral but internaly the "Germanias" started exporting heavily to the southern countries.
    So the conventional wisdom in essence is true.

  2. Thing is that German exports to EMU countries (as a % of total exports) stagnated throughout the 00 - 08 period. And started falling again pretty fast post-2009 while their trade surplus is intact. This imho means that they are in no way dependent to euro-periphery demand.