The recent issue of the Economist had a moderately optimistic piece on peripheral economies restructuring and becoming more competitive. The twin planks on which this assessment was based were improved primary budget balance and current account balance. The article even started with a heart-warming story of
shipping cars to China
for the first time.
Alas, peering under the bonnet reveals that the peripheral engine is still shot. Looking at the trade deficit with four major EU trade partners shows that there is one clear winner and it is not in the periphery. (Trade deficit which covers goods is a better indicator of competitiveness which is all about making and selling “stuff” - see footnote).
First spot the country with improved terms of trade with
Then see if it is the same country which has massively improved its terms of trade with
Surely the world’s consumer of last resort, the
US will be
So with which country have the peripherals improved their terms of trade? The answer is the country whose motor is shot even more than Europe’s –
But even here you have to look closely to see the improvement.
Footnote: Services covers traditional items, such as travel and transportation and items, such as communications, financial and computer services, royalties and license fees, and many types of other business services. Looking only at goods also strips out services rendered purely for tax optimisation purposes which skew balances for countries like Ireland.