BRUSSELS, Nov 26 (Reuters) - Germany and the Netherlands, which have big current account surpluses, should invest more to help boost economic growth and inflation in the whole euro zone, the European Commission said on Thursday.
The Commission, the European Union’s executive arm, analysed the economies of all 28 EU countries in an annual exercise called the macro economic imbalances procedure, aimed to identify problems early and address them before they grow.
It said that to boost the euro zone’s moderate economic recovery and persistently low inflation, governments should focus next year on investment, structural reforms and sound public finances.
The responsibility for more investment, however, was mainly with those who could afford it best — the Germans and the Dutch — that would also benefit from a rebalancing of their own economies.
“The risk of protracted low growth and low inflation at euro-area level should be mitigated especially by countries that are better placed to boost investment,” the Commission said.
“This is the case of Germany and the Netherlands whose current account surpluses are forecast to remain high in the coming years,” it said, adding the persistence of very high surpluses pointed to a lack of domestic sources of growth.
The Commission believes that a current account surplus higher than 7 percent of gross domestic product is excessive and Germany already last year had a surplus of 7.8 percent.
This year Germany will record a surplus of 8.7 percent, the Commission said, 8.6 percent in 2016 and 8.4 percent in 2017.
The surplus of the Netherlands is even higher — it has been well above 10 percent of GDP since 2012 and is only to ease to 9.6 percent in 2017.
“The persistence of sizeable current account surpluses in countries with relatively low deleveraging needs implies large savings and investment imbalances, pointing to a misallocation of resources,” the Commission said.
The remarks are unlikely to go down well in Germany, the world’s biggest exporter, which believes its export-oriented economy is running well and wants to calibrate additional investment in a way that would not clash with cutting debt.
German officials also believe that more spending by Europe’s biggest economy alone will not solve the growth problems of the single currency area and that other governments should do their homework too by implementing structural reforms.
The Commission agreed that “countries of systemic relevance” like Italy and France must step up structural reforms but noted those with high debt, like Italy, or a current account deficit like France, would benefit from the additional demand the surplus countries could create.
“A reduction of surpluses in countries with relatively low deleveraging needs would bring a much needed improvement in demand in the euro area and help ease the trade-off faced by highly indebted countries,” the Commission said.
It said the euro zone had one of the world’s largest current account surpluses in value terms, expected to reach some 390 billion euros, or 3.7 percent of its GDP.
The bulk of it is created by Germany and the Netherlands, whose contribution represents 2.5 percent of euro zone GDP and 0.7 percent respectively. The third biggest is Italy which adds 0.4 percent of euro zone GDP to the overall surplus number. (Reporting By Jan Strupczewski)