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EU highlights imbalances caused by German trade surplus

05 November 2013, 15:51 CET
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(BRUSSELS) - Germany, Europe's powerhouse economy, needs to boost domestic demand and so help its EU partners rather than continue to rely mostly on exports for growth, the European Commission said Tuesday.

Long the envy of its European Union partners for its strong public finances and powerful economy, Germany runs a huge trade surplus as one of the world's top exporters with China and the United States.

The Commission said it expected Germany's current account surplus -- the broadest measure of trade and fund flows -- to show a surplus again this year equal to 7.0 percent of Gross Domestic Product.

This will fall but only to 6.6 percent in 2014 and 6.4 percent in 2015, it said, with the reading having been above the EU recommended ceiling of 6.0 percent since 2007.

Such levels running for more than three years are notifiable as an 'economic imbalance' which under EU rules should be removed in order to ensure wider, more balanced growth in the 28-member bloc.

On Tuesday, EU Economic Affairs Commissioner Olli Rehn noted that a July EU leaders summit had called on Berlin "to create sustained conditions for wage growth" and to boost infrastructure investment so as "to help domestic demand."

These recommendations remain valid, Rehn said.

Asked if the issue would be formally notified as an 'economic imbalance' and so require remedy, he declined to comment, saying the issue would be discussed next week when EU finance ministers hold a regular formal meeting.

Last week, the Die Zeit weekly reported that the EU was preparing to launch a formal inquiry.

Germany's export-led growth, which leaves less of a ripple-effect on its own and the EU economy than domestic demand would, has been a sore point for some time.

The issue is sensitive and Berlin late last month rejected similar US criticism as "incomprehensible".

"The current account surplus is an expression of the strong competitiveness of the German economy and of international demand for high-quality products from Germany," the economy ministry said.

It said there were "no imbalances" that required a correction in German economic and budget policy, and pointed to "robust" salary growth, a gradual resumption of investment and increasing private consumption.


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