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Europe: Slowly pulling out of crisis?

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Gero Breloer/AP/File

(Read caption) German Chancellor Angela Merkel gestures during a press conference in Berlin, Germany, on July 19, 2013. Although Europe remains in a debt crisis, the surplus of several European countries has risen in the last few years. Even Greece's deficit has fallen dramatically, Karlsson says.

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As late as 2011, the Euro area only had a very small (€15 billion, or about 0.16% of GDP) aggregate current account surplus, as the large €147 billion surplus in Germany was almost entirely cancelled out by large deficits in countries like Spain, Portugal, Greece and Italy.

The German surplus has continued to increase, but the euro area surplus has increased more than 12-fold, and was €184 billion in the 12 months to May, up from €122 billion in 2012 and as previously stated €15 billion in 2011.  That €184 billion number is now higher than the €172 billion German surplus, meaning that the balance excluding Germany has improved from a deficit of €132 billion in 2011 and a deficit of €45 billion in 2012, to a surplus of €12 billion in the 12 months to May 2013.Spain, Portugal and Italy now all have surpluses and though Greece still has a deficit, it has fallen dramatically.

Paul Krugman once asserted that it was impossible for the deficit countries of the Euro area to eliminate their deficits while Germany kept their surplus, but that is exactly what has happened.

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