But we all know the rub: euro-area members' biggest trading partners are...other euro-area members. Member states can't all simultaneously raise net exports to other member states. So unless the northern core begins running big surpluses vis-a-vis the periphery, rising external demand means rising surpluses with the world outside the euro area.
As the latest data make clear, that is occuring. In the year to November of last year euro-zone exports were up 8% relative to the same period in 2011 while imports rose just 2%. The euro area's surpluses with Britain and America increased by nearly €13 billion and €14 billion, respectively, in that time, and its deficits with China and Japan dropped by €10 billion and €8 billion, respectively. But these figures, while directionally appropriate, are tiny relative to the output boost needed around the periphery. And neither is it clear that much of the gains are occuring around the periphery. Greece, Spain, and Portugal were running smaller trade deficits last year than in 2011, but not by that much—gaps shrank roughly €6 billion, €12 billion, and €5 billion, respectively. Meanwhile, Germany's surplus expanded by €19 billion.
Given this incredibly slow progress it isn't in the least surprising that peripheral countries remained mired in deep recession late last year while unemployment continued to rise. And while it is good news that Germany's export machine slowed a bit late last year, it is distressing that this slowdown led to an overall contraction in the German economy in the fourth quarter as German domestic demand failed to pick up the slack. That's very bad news; German consumers need to be gobbling up exports from the south.
It's nice that financial markets are much calmer, now, than they have been for much of the past three years. But the euro area's progress is occuring far too slowly. The periphery needs a return to growth and falling unemployment to secure the end of the crisis. The piddly surpluses now generated by the euro area as a whole simply aren't sufficient to get the job done.