19 November 2013

FT: German exports 'benefit Spanish economy'

Germany's booming export industry is helping Spain to overcome its own economic crisis, the Spanish economy minister has said, in remarks that offer rare support to Berlin at a time when its current account surplus is under international fire as never before.

Luis de Guindos, the Spanish economy minister, said Spain benefited from Germany’s export success because so many of Spain’s own exports to Europe’s largest economy came in the form of intermediate goods. Spanish shipments of car parts and chemicals are then used by German companies to create finished products that are in turn sold overseas.  "Our interest is that their exports continue", the minister added.

His comments fly in the face of recent international criticism of Germany’s trade and current account balances. Last week, the European Commission opened a formal “in-depth review” into Berlin’s current account surplus, which has breached the EU threshold of 6 per cent of gross domestic product for several years in a row. The move by Brussels followed stinging criticism of the German surplus in an official report by the US Treasury last month, and comes amid heated debate over whether Berlin is doing enough to stimulate internal demand.

The comments by Mr de Guindos show that not all European countries share those concerns and highlight how dependent many businesses on the continent have become on the German export machine. Spain has looked to its own booming export sector to drag the country out of crisis, and continues to sell the bulk of its goods inside the eurozone. Germany accounts for one-tenth of Spanish exports, half of which come in the form of intermediate goods, the minister said.

Mr de Guindos gave an upbeat assessment of the Spanish economy, dismissing recent concerns that the country could succumb to deflation. In October, the country’s measure of monthly inflation turned negative for the first time in four years, dropping to -0.1 per cent compared with 3.5 per cent in the same month one year ago.

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