Current account balance

The current account (Leistungsbilanz) shows all of a country's economic transactions with the rest of the world – it's broader than the trade balance alone.

4 sub-balances:

1. Trade balance (goods):

• Exports of goods − imports of goods
• Germany: strongly positive (~€230 billion)

2. Services balance:

• Tourism, IT services, consulting, licences
• Germany: slightly negative (Germans travel a lot and import IT services)

3. Primary income balance:

• Compensation of employees and investment income from abroad
• Dividends, interest, wages of cross-border commuters
• Germany: positive (German companies earn a lot abroad)

4. Secondary income balance (transfers):

• EU contributions, development aid, pensions paid abroad
• Germany: negative (the largest EU net contributor)

Why the current account matters:

• Surplus: the country saves more than it invests – it exports capital
• Deficit: the country spends more than it earns – it has to borrow
• Persistent imbalances: can lead to currency crises (Greece 2010)

Germany under criticism:

The European Commission has been warning for years: Germany's surplus of over 6% of GDP is considered a "macroeconomic imbalance". The solution according to experts: more domestic investment and higher wages.