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German Trade Surplus Rises More Than Estimated on Exports - (Bloomberg)

Posted by Chris Advincula on Nov 8, 2013 6:54:00 AM
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Germany’s trade surplus widened more than estimated in September, risking added criticism that the nation’s reliance on exports is hindering Europe’s economic recovery.

The surplus widened to 20.4 billion euros ($27.4 billion) from a revised 13.3 billion euros in August, the Federal Statistics Office in Wiesbaden said today. Economists surveyed by Bloomberg News predicted an increase to 15.4 billion euros. Exports gained 1.7 percent, also beating estimates, while imports dropped 1.9 percent.

The European Union this week threatened a probe of Germany’s trade surplus, adding to criticism from the International Monetary Fund and a U.S. Treasury report that rebuked the surpluses as a drain on European and global growth. Germany, Europe’s largest economy, said last week the critique was “not justified” and that exports (GRBTEXMM) were a sign of strength.

The nation’s current-account surplus, a measure of all trade including services, climbed to 19.7 billion euros from 10.1 billion euros the prior month. The European Commission forecasts that the surplus will reach 7 percent of output this year and 6.6 percent in 2014.

Fines Possible

Ultimately, countries can be fined for failing to correct imbalances under a euro-area law designed to strengthen Europe’s competitiveness -- a regulation that Germany endorsed as part of the response to the debt crisis. EU Economic and Monetary Affairs Commissioner Olli Rehn on Nov. 5 called for Germany to do more to boost consumption and foster higher wages. He recommended tax cuts, reductions in social contributions and infrastructure spending.

The IMF reprimanded Germany last week, urging Chancellor Angela Merkel’s government to curtail its export surplus to an “appropriate rate” to help euro partners cut deficits.

Merkel’s bloc, now in talks with Social Democrats to form a new government, signaled that the negotiators were standing by Germany’s export strength even as they consider a range of new spending initiatives.

European Central Bank President Mario Draghi yesterday praised the euro-area’s total current-account surplus, which was at 17.4 billion euros in August, and said that the region’s economic fundamentals allow governments to “pursue the right economic policies.” At the same time, he warned that “structural reforms are the necessary and sufficient condition for this to happen.”

Draghi spoke after the ECB cut its benchmark interest rate to a record low of 0.25 percent to fight a drop in inflation to the lowest level in four years. 


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