Charting Europe’s Financial Imbalances

Kate McKenzie’s puts it well, observing that when it comes to Europe “it’s the balance of payments, stupid” not the government budget deficits as such that matter. A country like Spain that was running a very respectable government budget was still left exposed to crisis because of massive private sector borrowing. Ireland is much the same story. And she’s got a chart illustrating that as of last year, at least, the imbalances within the Eurozone were still much much worse than they were eight years ago. The road back to a sustainable set of flows is awfully large and it involves Germany doing things (like trying to boost household consumption) that its political leaders seem to have no interest in doing.