- AP News
- Abc News
Greece's third bail-out programme came to an end on August 20th.
A look at the causes of the country's near-decade of crisis illustrates how external imbalances can reflect underlying troubles.
Gaps in public finances, as well as investments in property, were financed by borrowing from Germany and other northern European countries.
Wages and costs were pushed up, making exports less competitive—within the euro zone, there can be no currency devaluation—
and further widening Greece's current-account deficit.
When foreign lending seized up, the government needed bailing out and the banks crumbled.
Portugal (chiefly because of its public finances), Spain and Ireland (blame private-sector housing bubbles) have similar tales to tell.
As those four countries have stabilised or recovered, they have wholly or partly reversed their current-account deficits.
But if the periphery has adjusted, the same is not true of the euro area's creditor countries.
Surpluses in Germany and the Netherlands have grown. As a consequence, the euro zone in total has a substantial current-account surplus.
In the year to June it was 3.6% of GDP (the same as the record for a calendar year, set in 2016). Growth is likely to have been hurt.
In 2017, according to the IMF's External Sector Report, published last month,
the euro area had the world's biggest absolute current-account surplus, $442bn. Germany has the largest of any single country.
China's once-vast surplus has narrowed: in the first half of this year, indeed, China reported a deficit.
America's deficit remains the world's biggest, $466bn last year.
Corporate-tax cuts, interest-rate rises and the associated dollar appreciation could widen it further.