Saturday, July 16, 2005

That Pesky US Twin Deficit (1)

Foreign exchange markets say they are marking down the $ against the Euro because, compared with the Eurozone, the US has a) an excessive government spending deficit, and b) an excessive import/export deficit.

Except that the US government spending deficit is less then those of the three significant Eurozone economies. So I guess the US has a Single Deficit Problem!

Says the WSJ (my ellipsis)

...the (US) deficit as a share of GDP is down to 2.7% (very near its historical average).

But the Eurozone's leaders are nicht sehr gut::

Official figures showed that without policy changes Germany is likely to break the EU deficit cap of 3% of gross domestic product (GDP) until 2008.

It has already broken that limit every year since 2002, and is set to unveil a deficit of 3.7% of GDP in 2005.

And Number 2 Euro economy is also "dans le tank":

France's public sector deficit will breach the EU's annual three per cent of GDP limit in 2005, despite recent government assurances of a 2.9 per cent deficit, Le Monde reports.

The newspaper has obtained a "confidential study" from the French treasury reporting that the trend at present points to a deficit of 3.5-3.6 per cent in 2005 and 3.5 percent in 2006.

And my friends the Italians are non molto bene:

...the European Commission said today that it considers that there is an excessive budget deficit in Italy.

The deficit was 3.2% of GDP in 2003 and 2004 and is expected to remain well above the 3% Treaty reference value in 2005 and 2006 under an unchanged policy scenario.

Oh well, at least the US has that big import/export deficit. But maybe not for long though...