The German institutes that revised their economic forecasts yesterday and estimated that the current account balance would reach a surplus of 7.9% of GDP. According to European rules Germany will have to reign in their surplus to 6.0% or face sanctions by way of fines.
Their 2013 surplus came in at 7.52% and early market estimates has the 2014 surplus at 6.80%
While AEP does his usual fire and brimstone roundup the bottom line is that Germany needs to hit the target but it will be the other member states that have to make the decision to order Germany to toe the line. As is usual in Europe the goalpost wheels will likely be re-oiled so that Germany can present a plan to tackle the surplus and sanctions are a long way off. It will be interesting to see if any countries want to put the screws on them though. It’s also likely that Germany won’t take too kindly to being ordered about and having the rule book waved in their face.
Either way it potentially sets us up for a bit of inhouse euro zone friction, which is always fun to watch.
German current account % of GDP 11 04 2014
