German Benefit Is Greek Problem

Germany reported a better than expected Dec trade surplus but while the data looks good on the surface at EUR16.7 bln (s.a.), it underscores a key source of tension in the euro zone.

Officials from the major countries have long discussed the need to address global imbalances. These imbalances also exist within the euro zone itself. The German commitment to its export sector has enabled the country to export roughly 40% of its GDP (roughly in line with China). However, its successful hyper-competitiveness also forces other countries such as Greece to run trade deficits. This is a major part of the underlying problem in Europe.

The German seasonally adjusted trade surplus narrowed just EUR0.3 bln from EUR17.0 bln in November led by a 3.0% m/m gain in exports (vs. 1.1% in November), more than offsetting a 4.5% gain in imports (after a downwardly revised -6.5% drop.) That’s in contrast to the November Greek trade deficit which widened to EUR2.4 bln from EUR2.3 bln in October with exports slipping 6.0% while imports fell -1.3%.