Euro area balance of payments and the financial markets

The euro area current account has remained balanced throughout the entire period of European Monetary Union (EMU). Country-specific differences have, however, been extremely large. Spain s current account deficit has in recent times been as much as 10% of the country s GDP. Monetarily, it is the second largest current account deficit in the world after the United States, amounting to substantially more than USD 100 billion in annualised terms. In contrast, Germany has a current account surplus that is slightly higher still, in dollar terms. It is, in fact, nearly as large as Japan s. The euro area balance is thus explained by the steep opposition between the Spanish and German current accounts, combined with other euro area countries small if in some small countries relatively large at national level deficits or surpluses in dollar terms.