A weaker euro for a weaker Europe
The weakness of the Chinese currency has been a major contributor to southern Europe’s economic malaise.
What can be done to help the ‘crisis economies’ of southern Europe reduce their external deficits? The debate is often presented as a conflict between the deficit-burdened PIIGS – Portugal, Italy, Ireland, Greece, and Spain – and the eurozone’s current-account surplus countries, particularly Germany. But a new and more important imbalance has emerged in recent years: the PIIGS’ trade and services deficits with China, which suggest a possible solution to southern Europe’s economic malaise – a stronger renminbi.