In an interview last month, Kerr Neilson commented on the fact that each and every one of Europe’s periphery countries is currently running a current account surplus. The current account, for those wise enough to have skipped economics classes, is the sum of the balance of trade (exports minus imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.
I don’t know whether that means that these economies are genuinely healing themselves, or are so battered by austerity and unemployment that imports just aren’t an option. The export data out of Spain, where real wage decreases have been the steepest, hints at the former. Ireland perhaps less so, although it has exported more than it imports for years now. I’m not even sure whether it greatly matters why. Economies do tend to heal over time and this might be some graphical evidence of a healing process at work, although one, for the most part, still overshadowed by large negative capital accounts.
What I do know is that the picture these graphs paint will be a surprise to most investors. Perhaps the PIIGS aren’t permanent basket cases after all.
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