As economist Robert Triffin explained more than 50 years ago, the development of an international reserve currency requires that the issuing country or area records a current account deficit. This partly explains why the yen and the Deutschmark did not develop an equivalent role to the dollar, in spite of the relative strength of the Japanese and German economies. The eurozone economy is now in the same position.
The eurozone countries have adjusted, during the financial crisis, from running a broad external balance, which prevailed until 2010, to a rising surplus (2.7 per cent of gross domestic product in 2013, up to 3 per cent in 2015). Continue reading »