What happened to the Euro area current accounts since the introduction of the Euro?
Periodically, I update my charts on the Euro effects on the external balances of the EA-12, the original economies of the Euro area. Here are the updates:
Considering first cumulated current account balances over 1980-2017 period, the chart below aggregates the EA12 into two sub-groups:
- The ‘periphery’ defined as a group composed of Italy, Greece, Spain and Portugal
- The ‘core’ group composed of the remaining EA12 countries
- Current account deficits in the ‘peripheral’ states predate the introduction of the Euro
- Since the introduction of the Euro through 2013 there was a consistent increase in the current account deficits amongst the ‘periphery’ states, with acceleration in deficits staring exactly at the point of the introduction of the Euro
- Current account deficits in the Euro area ‘peripheral’ states were rapidly accelerating into 2009
- Since 2014, current account deficits in the ‘peripheral’ states have been drawn down, at a moderate rate, as consistent with the internal deleveraging of these economies
- Meanwhile, the introduction of the Euro accelerated accumulation of current account surpluses within the ‘core’ group of EA12
- The rate of current account surpluses acceleration increased dramatically around 2004 and then again starting with 2009
- From 2000 and prior to 2014, Eurozone performance in terms of growth rates in exports of goods and services largely underperformed other advanced economies (ex-G7) and was in line with G7 performance
- Before 2000, Eurozone was broadly in line with both the G7 and other advanced economies in terms of growth rates in exports of goods and services
- Lastly, starting with 2014, the Euro area has been outperforming both the G7 and other advanced economies in terms of growth in exports of goods and services – a development that is more consistent with the fallout from the twin Global Financial Crisis (2007-2009) and the Euro Area Sovereign Debt Crisis (2011-2013), as the process of internal devaluation forced a number of Eurozone countries into more aggressive exporting
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