External Imbalaces in the Euro Area

13-06-2018

The current account balance is one of the indicators used in the Macroeconomic Imbalances Procedure (MIP) to signal a possible external imbalance: it provides information on the economic flows of a Member State with the rest of the world. It is the sum of the balances of trade (in goods and services), primary income (dividends and interests on foreign investments, plus salaries paid to/received by non-residents) and secondary income (remittances to/by foreign workers and contributions to EU institutions). The current accounts balance equals the difference between national savings and investment: catching-up countries often run current account deficits, in view of future growth, while countries with ageing population may decide to save today, i.e. run current account surpluses, to avoid drop of consumption in the future.

The current account balance is one of the indicators used in the Macroeconomic Imbalances Procedure (MIP) to signal a possible external imbalance: it provides information on the economic flows of a Member State with the rest of the world. It is the sum of the balances of trade (in goods and services), primary income (dividends and interests on foreign investments, plus salaries paid to/received by non-residents) and secondary income (remittances to/by foreign workers and contributions to EU institutions). The current accounts balance equals the difference between national savings and investment: catching-up countries often run current account deficits, in view of future growth, while countries with ageing population may decide to save today, i.e. run current account surpluses, to avoid drop of consumption in the future.