Nosemonkey's EUtopia

In search of a European identity

EU not doing too well?

As regular readers of this blog will know, I’m no economist and numbers tend to confuse me. But still, this doesn’t look good:

“According to the latest revisions, the EU25 external current account recorded a deficit of 22.5 billion euro in the first quarter of 2005, as compared with a deficit of 3.9 billion euro in the first quarter of 2004 and a deficit of 2.3 billion euro in the fourth quarter of 2004.”

I’ll try and update this post later, once I’ve dug out some analysis from people who know what they’re talking about when it comes to this kind of thing.


  1. The �22.5bn is just the deficit in goods. The surplus in services (which isn't counted in that �22.5bn) hasn't changed. The only thing that changed as 2004 became 2005 was, I believe tariffs on certain imported goods as a result of China's membership of the WTO.
    See your local textiles industry association lobby or free-market economists for whether this is a good or bad thing, rather than an indictment of the EU economy.

  2. Neil – I don't think you're right. The -EUR22.5bn is the total (goods + services + income + current transfers) account.

    The goods balance is -EUR22.1bn, but the similarity is a coincidence (and the negative goods balance has doubled since Q404, when it was just -10.4bn)

  3. john b
    – I have to admit to just skim-reading the data. I even initially thought the figures could be explained by the UK alone, although the NSO is posting a deficit of ~GBP5.5 bn for 2005 Q1, the majority of this is intra-EU trade – "only" GBP900mn, so ca. �1.3bn is non-EU trade deficit. I find it hard to believe (in terms of pure physical goods)that Chinese imports didn't increase dramatically after Jan 1st though.
    Increasing raw material prices, oil, iron ore etc. surely play a role too…

  4. Current account deficit – we buy more stuff from abroad than we sell to it. So what? It happens. Do you believe that this is a result of a deleterious economic trend indicating that we are, or will become, poorer?

  5. Marcin – I don't know (as I say, I'm no economist). All I do know is that when I end up getting overdrawn, my bank isn't happy and I can't afford to go to the pub as often. Whether this translates to a continental scale or not I have no idea.

  6. Percentages my dear!

    Thats what makes sense of it all!

    If I was 10k in debt, would it really be that bad if I earned 100k a year, whereas if I was on the dole I would be in big do do!

    22.5bn don't sound too bad when EU GDP is 8,000bn.

    I think the UK's deficit is worse percentage wise, and you Euro haters are always on about how well we are doing compared to the EU.

    Just wait until our credit boom hits the fan and we are begging the Eurozone to let us join the Euro!

    The Eurozone has its problems with S.E Asian low wage competition, as we all do, but they are playing the long game and not punishing their poor with more inequality.

    I'm sick of hearing Brits saying how the ECB should cut its 2% interest rate when the BoE rate is 4.75%. Derrr!!

  7. Neil – I know the title of the blog's misleading, but I'm actually pro-EU – merely trying to understand the whole thing better. With my limited grasp of economics this struck me as a bad thing, and as I always try and keep an open mind, thought it might be an idea to try and find out what's going on.

    Looks like it's not as bad as I initially thought at any rate, which is heartening. Still haven't found any extensive analysis of the figures though – or an explanation for why the deficit seems to have increased so much in the space of a quarter.