In additional to its fiscal enforcement powers, the European Commission is now mandated to tackle excessive imbalances in the eurozone that could endanger its stability.
Due to German lobbying, EU rules on imbalances are dangerously unbalanced: while they deem a current-account deficit of 4% of GDP problematic, a surplus has to exceed 6% of GDP before it is considered excessive. Nor do EU rules take account of absolute size, so a surplus in tiny Luxembourg is treated like one in mighty Germany. That tilt allowed the Commission to overlook Germany’s vast current-account surplus in its first assessment of dangerous imbalances last year: Germany’s surplus averaged 5.9% over the three preceding years. Yet in dollar terms, Germany’s surplus is now the world’s largest.
The Commission’s directorate-general for economic and financial affairs is due to deliver its latest assessment of imbalances on 15 November. This time, Germany’s surplus is well above the prescribed 6% limit: according to official Eurostat figures, Germany’s current account surplus was 6.3% of GDP in 2010, 6.2% in 2011 and 7.0% in 2012. Thus, far from being a “growth locomotive”, as Wolfgang Schäuble claims, Germany is a drag on growth: not only does it buy less than it sells, the gap between its exports and imports is growing.
As an impartial enforcer of EU law, the Commission is obliged to act. It must demand corrective action in Germany. Higher wages and increased investment would be a good place to start.