The Drivers of Current Account Surplus in Germany and the Politics of Rebalancing in the Eurozone. EU Centre, Singapore Working Paper No. 24, April 2015

Current account deficits have caught the public’s attention as they have contributed to the European debt crisis. However, surpluses also constitute an issue as a deficit in any country must be financed through a surplus in another country. In 2013, Germany, now the world’s largest surplus economy, registered a record high US$273 billion surplus. This paper looks at what accounts for Germany’s surplus, revealing that the major driving factors include strong global demand for quality German exports, domestic wage restraint, an undervalued single currency, high domestic savings rate and interest rate convergence in the euro area. This paper echoes the US Treasury’s view that a persistent German surplus makes it harder for the eurozone as a whole and the southern peripheral economies in particular to recover from the current financial crisis by imposing a Europe-wide “deflationary bias” through pushing up the exchange rate of the euro, exporting feeble German inflation and projecting its ultra-tight macroeconomic policies onto crisis economies. This paper contends that Germany’s trade surplus is likely to endure as Germany and other eurozone countries uphold diverging views on the nature of the surplus engage in a blame-game amidst a sluggish rebalancing process. Prizing the surplus as a reflection of hard work and economic competitiveness, German authorities urge their southern eurozone colleagues to undertake bold structural reforms to correct the imbalance, while the hand-tied governments in crisis-stricken economies call on Germany to do its “homework” by boosting German demands for European goods and services.

Asian Middle Classes - Drivers of Political Change? Asia Policy Brief 2014/06, November 2014

Asia watchers have been kept exceptionally busy by recent political developments in the region. An unprecedented landslide victory in India’s general elections, pro-democracy protests in Hong Kong, close elections in Indonesia, a coup in Thailand – the list goes on. As unrelated as these events appear, analysts may find a missing link among a social group that is currently exploding in numbers: Asia’s middle classes. Often discussed simply in terms of its economic potential, Asia’s middle-income population is also flexing its political muscle. A closer look at its influence throughout the region in recent months seems to confirm for the field of politics what economists have known for some time: The rise of the Asian middle classes constitutes one of the most fundamental transformations of our time. The consequences remain to be seen.