EU takes aim at Germany's soaraway surplus

(BERLIN) - The EU Commission said Wednesday that Germany's huge current account surplus is a source of economic imbalance in Europe as Berlin appears to be admitting for the first time that there is a problem.

"Nobody wants to criticise Germany for having a strong external demand and competitiveness," the EU's commissioner for economic and monetary affairs Olli Rehn said on the presentation of a new report on the matter in Brussels.

"I want see every EU member states be as competitive as Germany," he said.

But "at the same time, Germany -- and to some extent the rest of Europe -- would benefit from stronger domestic investment and reinforced domestic demand in Germany," Rehn said.

Rehn's report found that Germany "should aim to identify and implement measures that help strengthen domestic demand and the economy's growth potential."

And it identified low levels of private and public sector investment as part of the problem.

Germany has long come under fire for its booming current account surplus, not only from Brussels but the United States as well, with critics arguing that its economic prowess comes at the expense of the eurozone's weaker members.

The critics argue that Germany needs to boost domestic demand and so help its EU partners by spurring export-driven growth in their economies rather than continue to rely mostly on its own exports for growth.

Recent data showed that Europe's biggest economy notched up a trade surplus of 198.9 billion euros ($273 billion) in 2013, the highest since foreign trade data have been compiled.

In the past, Berlin has consistently dismissed the criticism, arguing that the high surplus is simply a reflection of the competitiveness of German firms, and that most of the surplus is with countries outside the eurozone.

However, there are signs that the new "grand" left-right coalition of Angela Merkel may be starting to take on board some of the criticisms.

"Germany can be proud of the strength of its industry and its exports," Economy Minister and deputy chancellor Sigmar Gabriel insisted on Wednesday.

But he crucially added: "Measures decided by the government in its new programme will allow us to boost public investment and growth momentum and that will help correct the imbalances."

In an interview with AFP last month, state secretary for European affairs Michael Roth also acknowledged that "imbalances have appeared in the EU," notably due to the fact that German wages have remained low for a long period.

The new coalition government is planning to introduce a minimum wage and invest in infrastructure, education and digital technologies.

But for some voices within Merkel's conservative CDU party, the mere admission of imbalances marks a betrayal.

"I'm surprised that the economy minister doesn't reject the criticism and actually seems to accept it," said conservative MP Christian von Stetten in an interview with the business daily Handelsblatt.

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