The politics of the German surplus

For investors in Europe the question of the Eurozone’s internal macroeconomic imbalances is central to the long term sustainability of the currency block. Last week, for the first time, the European Commission, formally triggered a review of Germany’s large current account surplus under one of the more obscure parts of the EU’s post-2011 economic governance arrangements. Berlin’s sensitivity to having its contribution to aggregate Eurozone demand raised as a policy problem being what it is, this is a small but interesting step. It has – in theory - a range of policy tools behind it, although they are more than likely to remain unused. So does the Commission’s move simply highlight the limits of Eurozone economic governance? Or could it shift the terms of the policy debate about Eurozone demand?