European Commission initiates review of Germany’s high export surplus

flag of germanyThe European Commission recently initiated a review of Germany’s high export surplus—a move that could lead to sanctions against the country.

Jose Manuel Barroso, the president of the EC, said the review stems from rules that are designed to prevent Member States from holding on to funds at the expense of other Member States, The Guardian reports.

Since 2007, Germany has operated with an account surplus of more than six percent of its GDP. Export surpluses in the rest of the world reached $26.5 billion last year, higher than eight percent of last year’s economic output.

“A high surplus does not necessarily mean that there is an imbalance,” Barroso said, according to The Guardian. “We do need to examine this further and understand whether a high surplus in Germany is something affecting the functioning of the European economy as a whole.”

The surplus has drawn criticism from European and U.S. leaders who have said Germany should focus its efforts on increasing domestic demand to stabilize growth. If the review finds the surplus to be economically harmful, the EU will recommend steps to correct the problem.

Under new European Union rules implemented in 2011, the commission is responsible for ensuring that member states do not develop economic imbalances that could become detrimental if not addressed. A deficit of more than four percent of GDP or a persistently large surplus of more than six percent are among the commission’s 30 warning indicators, The Guardian reports.

The review prompted backlash from German officials, who dismissed concerns that its export surplus hindered the recoveries of other member states. Officials said approximately one-third of the country’s surplus stems from investment in other member countries.

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