While current account surpluses should be a sign of healthy competitiveness, they can also reflect market failures or a weakness of domestic demand and investment opportunities. The macro-economic imbalances observed in the EU resulted in a misallocation of resources in surplus countries with negative implications for growth.
The adjustment of external positions is proceeding in many countries and in the euro area as a whole. For the deficit countries, it shows the dampening effects on demand as the inevitable unwinding of high debt levels proceeds and thus imports are reduced. But deficit countries have also experienced a rise in exports thanks to gains in competitiveness. We expect this trend to continue.
You can see that the current account of the euro area as a whole is moving into surplus. Some countries, like Portugal, have been able to broaden their export base to non-EU countries. Also the current account in Spain is moving into surplus. In the Netherlands the current account surplus may increase, reflecting both a competitive and export-oriented economy, but the housing market now contracts domestic demand in the country. Finland, in contrast, now belongs to the group of "former surplus countries" and is alone in this group, since Finland turned to deficit in 2011.
Though there has been clear progress in unit labour cost convergence, the adjustment in labour markets is not complete. Competitiveness losses accumulated over many years, have not yet been fully recovered.
In a number of countries the adjustment will have to continue through wage moderation as structural reforms proceed. At the same time, the more dynamic job developments that we are seeing in the surplus countries, not least in Germany, will contribute to the rebalancing of the euro area economy in its entirety.
There are a number of common themes:
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Structural reforms support growth and job creation, which in turn will reduce pressures on public finances. But this often takes time. That is why a credible medium-term fiscal strategy and a comprehensive set of structural reforms complement each other.
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External adjustment is clearly proceeding and needs to continue and in some countries intensify.
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In some countries, price and non-price competitiveness remain crucial concerns.
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Housing markets are still adjusting.
I want to underline and remind you that we are indeed making the country specific recommendations at the end of May. These in-depth reviews are intended as policy making raw material for Member States who have imbalances and they give some general conclusion, indications at this stage but we will make a more profound assessment once we get Stability and Reform programmes from the Member States by early May. On that basis we will make the country specific recommendations.
Full speech
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