German $280bn current account surplus likely to raise eyebrows

 
Joseph Millis
THE GERMAN government will come under pressure to do more to boost domestic demand after a report revealed yesterday that it was on track to achieve a record current account surplus this year.

A forecast by the Ifo think tank estimated that Europe’s largest economy would have the world’s largest current account surplus, at about $280bn (£172.6bn) this year.

Last year, Germany came under criticism from the European Commission for its surplus, which some economists said worsened the Eurozone’s financial crisis.

In recent months it has come under renewed pressure to step up public spending to support Europe’s faltering economic recovery, with the Commission, International Monetary Fund and European Central Bank presi­dent Mario Draghi suggesting Ger­many could do more.

According to Reuters, the report by the Munich-based institute will do little to silence the critics.

Germany’s predicted surplus will be followed by China, the world’s leading exporter, which is forecast to achieve a surplus of around $230bn.

“For Germany the trade in goods is the key driver,” said Ifo economist Steffen Henzel. He added that investing so much capital abroad, while there was a lack of money to invest at home, was not a good model in the long run.