from Gold Money:
News out of Germany show that the underlying problems of the eurozone crisis are still far from being resolved. According to data from the Ifo Institute in Munich, the German current account surplus is estimated to reach 210 billion US dollar in 2012. The institute calculates that this surplus will be the highest in the world and bigger than China’s surplus with an estimated 203 billion US dollar.
While many politicians in Germany have celebrated current account surpluses as a ‘good thing’ in the past – coining phrases like ‘world export champion’ – these trade imbalances caused by neo-mercantilist thinking have shown to be a major fundamental driver of the current financial crisis in Europe. In simple terms, this new data shows once more that the competitiveness of the crisis countries has not improved.
After it became obvious that the PIIGS countries were not able to repay the loans (read: German savings) with which they financed their spending spree in the years 1999-2007, those private capital flows from Germany into the periphery reversed, leading to a sobering crisis in those nations. In response, governments have set up public capital flows in the form of ‘rescue packages’, which basically force Germany to continue to give more loans to those countries, but now on the government level.