WHETHER your trade account is deteriorating or improving is not the only measure of competitiveness, of course. As many noted, Germany kept the lid on its unit labour costs in the early years of euro membership but other nations did not. Correcting the internal imbalances requires other countries to reduce their costs, relative to those of Germany. So here is a condensed version of the figures from Eurostat, covering the same years and countries as the trade data.
% change 2008-11
France +3.6
Germany +4.6
Greece -1.7
Ireland +4.6
Italy +2.7
Portugal 0.0
Spain -2.7
So everybody (bar Ireland) has gained some of the ground lost to Germany, with Spain achieving the most. The Irish figure seems rather odd and is the result of a big rise in 2008 - since then costs have been falling fast.
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Competitiveness on the international market is the primary issue. Europe does not import oil from Germany. Unlike during Keynes day, Europe now has to compete with other continents for global natural resources, and the competition is becoming more efficient by the day. Europe does not need to export more to Germany, because Germany has no oil to send them. Europe needs to export to continents that produce essential natural resources.
Because banks misallocated capital building useless Keynesian pyramids, there are not enough efficient factories to produce widgets that can be traded for oil, copper, etc... The misallocated capital is gone, and no longer available to build factories. No factories, no jobs. In addition, bank loans extended to build Keynesian pyramids cannot be repaid, and it will take 30% of European GDP to bail out the banks.
The current credit crisis is primarily an artifact of banks misallocating capital.
It´s about "Saint & Sinners":
http://thefaintofheart.wordpress.com/2012/05/13/saint-and-sinners-german...
Germany cries for more competitiveness, but will a significant decrease in her trade surplus with the rest of the EuroZone bring her true happiness?
Tune in next decade . . .
Given very strong German wage growth in the past year, and an excellent first quarter GDP figure, will there be a surge in German holiday makers to the Mediterranean?
Let's hope so - Spain, Greece and Portugal would be the biggest beneficiaries (besides the tourists, of course).
Might add a few fractional points to 2nd/3rd quarter GDP numbers in Spain, and do a little bit to stem the pain in Greece.
To shaun39 (repetition for my post history)
Although I've not yet expressed before my admiration for your well thought and well researched posts, I do that now with great pleasure.
But can you please not include Portugal among the Mediterranean countries?
I'm sure the Portuguese, whom I know well, will feel honoured to be joined together with the region that has created so many brilliant civilizations.
If I were a conspiracy theorist, I'd even believe the Portuguese tourist organizations help to perpetuate the confusion so the colder, fiercer and foggier Atlantic waters and winds are believed to be as balmy as their Mediterranean counterparts.
But I am a stickler for facts and both the closest and central distances of, say, Germany to the Mediterranean Sea are definitely shorter than Portugal's. Not to mention the farthest point of both...
Yet I don't think I've ever heard anyone mention Germany as a Mediterranean country...
Or Britain as a Basque country, yet she is closer to the Bay of Biscay than Portugal is to the Mediterranean.
Geography is a much neglected subject these days. This is a pity: if you don't know the geography of your own house you are liable to have your meals in the toilet and, well, do the rest in the dining room.
Sorry for being a nitpicker. I do enjoy your well researched comments. Don't spoil them with an unimportant factual error.
Thanks - sorry for being sloppy.
In Scotland, Portugal stands in the popular psyche alongside Mediterranean holiday destinations and the Canaries - all are indeed marketed together in the same brochures, websites and shop windows. Indeed, in the English language, "Mediterranean" is often used as an adjective just to describe warm weather in the UK (hey - if we're talking about it all the time, we have to invent new words. If it's any consolation, we also talk of "Baltic" and "Arctic" weather).
Will be sure to preserve the distinction in future.
To shaun39 (repetition for my post history)
Indeed, I know.
I lived for years in Manchester. In London too.
And although I never properly "lived" in Scotland I used to spend longish periods in Glasgow in my mid teens and later as a professional.
When I was three years old a Scots gent who had some high position in a clan, made me a honorary member so that I could dress properly for some children's mask festival where I was born.
A peculiar West European place that in the thirties had more British babies than locals. I wasn't a local either; father was there installing a state of art radio-cum-weather station and my parents lived there for six years.
That was eighty years ago so it's amusing to reminisce about it now.
Speaking of weather: by chance last Wednesday I was in Gib and crossed to North Africa. There was an unseasonal heat wave not far from 95ºC(35ºC). The Mediterranean smooth as mirror with that greyish colour and a foot high mist typical of calm seas.
Then there was that mostly SW to NE straight line that tends to mark the separation of waters from the Atlantic to the Mediterranean. Roughly from Tangier (Morocco) to Tarifa (Spain).
The line was clearly visible without binoculars: on the Atlantic side choppy seas, emerald green water marks.
Although the Portuguese border is still some 230 miles farther west, sea water conditions could hardly be more different.
Don't worry about being offensive to Portuguese by calling them Mediterranean: I don't think they are offended at all.
They are just far less temperamentally similar to Mediterranean peoples than Edinborough dwellers are to Londoners and the language isn't even the same or mutually not easily understandable.
But the Atlantic is the the Atlantic and the Mediterranean the Mediterranean.
Equally worthy but weather wise and temperamentally not really the same...
My previous post (I don't use "edit"; it spoils my carefully chosen spacing)
"....emerald green water marks".
How on earth did that "marks" crop up?
"...emerald green waters." Obviously.
Here's what really mattered:
http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=0&...
In a credit crisis, countries with the worst net investment positions are the ones that have experienced capital flight - experiencing the deepest reductions in GDP and the weakest recoveries:
General loss of trust and rising home preference of capital is doing lots of damage. Not just in the Eurozone - Hungary, Bulgaria and Mexico suffered badly too. International capital flows are a good thing where they allow the world economy to exploit investment opportunities that would otherwise go unexploited. But over time - for sustainability - national savings rates must rise high enough to prevent extreme deterioration in the national investment position.
It isn't really unit labour costs that matter.
It is unit labour costs in the tradable sector that matter. Changes in tradable sector unit labour costs have probably been more dramatic than these numbers suggest.
Would be nice if somebody could collate these. Has Eurostat done this? Is there enough raw data available for someone else to do this?
Ireland's 2008 deterioration is most likely to be a fall in the measured productivity of the financial sector as the bubble crashed. Since then, the tradable sector has enjoyed falling unit labour costs, with flat nominal wages, continued export price inflation and rising productivity.
Great comments.