LONDON A sharp rise in the euro zone's current account surplus puts the focus firmly on what Germany's new government can do to boost consumption and revive investment in Europe's largest economy.
Stronger domestic demand in Germany would suck in more goods from countries on the southern rim of the euro zone and so help them to keep improving their own external payment positions by expanding exports rather than crushing spending.
The austerity policies pursued by the bloc's weaker economies to reduce unsustainable debts are one reason why the euro zone has swung from a current account deficit of 0.2 percent of gross domestic product in 2009 to a surplus of 2.1 percent in the 12 months to the end of July.
But the main reason is Germany, which ran a surplus with non-euro countries last year of 94.93 billion euros, according to Bundesbank data. The surplus for the whole of the currency bloc in 2012 was 122.44 billion euros.
Germany's overall current account surplus last year was 6.9 percent of GDP - higher even than the 6 percent threshold that the European Commission considers excessive.
Martin Wolf, writing in the Financial Times, said Germany's 'beggar-my-neighbour policies' were exporting bankruptcy and unemployment and were inconsistent with the euro zone's commitments to the Group of 20 leading economies.
Within the euro zone, Germany's surplus with other members has halved as a share of GDP since 2007. But the surplus is nevertheless the mechanical counterpart of deficits elsewhere.
Putting the onus of adjustment entirely on the southern rim without any offsetting stimulus measures could threaten the very survival of the shared currency, said Paul de Grauwe, a professor at the London School of Economics.
Unemployment is at a record high in the periphery, where investment has fallen almost three times more than in core countries. "Politically this is not acceptable and therefore these countries will be pushed into default," de Grauwe said.
Germany is in the dock even though its output is now 2 percent above its pre-crisis peak thanks to increases in private consumption and government spending, whereas the euro zone as a whole is still 3 percent below it. Tight labour markets are feeding through into wage rises and increased purchasing power.
"It's not that people can point to Germany and say 'you are suppressing domestic demand' because conditions are already supporting domestic demand," said Andrew Benito, an economist with Goldman Sachs in London.
Where critics might have a point is that Germany needs to liberalise parts of its service sector, which would shift resources gradually from export industries and so boost domestic demand, Benito said.
In the shorter term, a revival of capital spending was possible once post-election uncertainty lifted, he added.
Investment subtracted 1 percentage point from growth last year and is still 7.5 percent below its pre-crisis peak. Given that the economy is operating with little slack, Benito said the weakness was puzzling.
Philippe Gudin, an economist with Barclays in Paris, said a recovery in investment was key to Germany's economic outlook.
If re-elected Chancellor Angela Merkel forges a coalition between her conservatives and the centre-left Social Democrats, as is widely expected, Gudin saw a good chance that she would agree to higher public investment, financed through higher taxes, in order to catalyse more private capital spending.
All else equal, an increase in investment would reduce Germany's savings surplus. "The problem is that because of the size of the current account a rebalancing of growth just means stabilisation of the surplus and not a decline," Gudin said.
Internationally, the euro zone surplus is not big enough to set alarm bells ringing. Indeed, policy makers can take comfort that the imbalances of the world's two biggest economies have shrivelled.
China's surplus crested in 2008 at around 9.3 percent of GDP, while the U.S. deficit peaked at 5.8 percent of GDP in 2006. This year both are set to be less than 3 percent.
Yet Stephen King, chief economist with HSBC, said the global picture was still uncomfortable. "The problem is that the imbalances that have narrowed in those two countries have reappeared elsewhere," he said.
After all, the global current account must by definition be in balance. Increased savings in some countries must be accommodated by falling savings in others.
So it is that Turkey, India, Indonesia, Brazil and South Africa, for instance, have ended up with worryingly high current account deficits as foreign capital seeking high yields has stoked unsustainable, credit-fueled domestic demand.
Disagreements over how to reduce imbalances has echoes of the debate at the Bretton Woods monetary conference in 1944 when John Maynard Keynes, leading the British delegation, argued unsuccessfully that surplus countries should share the burden.
The United States, in surplus at the time and bankrolling Britain's war effort, had the power to insist that it was deficit states that must adjust in the post-war order, much as Germany is prevailing with its prescriptions for the euro zone.
Charles Dumas with Lombard Street Research, a London consultancy, said the failure of surplus countries like Germany to adjust along these lines was darkening the economic outlook.
"They're not taking steps to reduce their saving, which is another way of saying they're not taking steps to increase their consumption, which means a deficiency, on a global scale, of consumption," he said.
(Editing by Ruth Pitchford)