Wall Street Journal
March 2, 2012
Not all euro-zone economic news is bad news. In some respects, the currency bloc is adapting more quickly than many expected. One ray of hope: current-account deficits among crisis countries—a key measure of the imbalances that lie at the heart of the euro crisis—have more than halved in the past three years, according to recent trade data. Perhaps restoring the competitiveness of the periphery won't be as hard as many fear.
The numbers tell their own story: since the second quarter of 2008, the aggregate current-account deficit of Greece, Portugal, Ireland, Spain and Italy has fallen from a weighted average 10.9% of GDP to just 4.3% by the third quarter of 2011, notes Deutsche Bank. Ireland has been largely in surplus since the second half of 2010, thanks to a complete collapse in imports, but Spain has reduced its deficit to around 3% thanks to a 12.5% increase in exports—a bigger increase in market share than Germany.
True, Greece hasn't fared so well. Imports have plummeted as one would expect given the collapse in the domestic economy, but so too have exports. That could reflect difficulties in getting credit, disruption to supply chains due to social unrest or businesses relocating amid fears of a euro-zone exit. But it suggests Greece will continue to remain dependent on external official-sector financing to cover its balance of payments for some time. Italy and France have also seen their current-account deficits widen over the last two years, although in Italy's case this is entirely due to the rising cost of fuel imports.
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