Do the Euro Zone Countries Really Want Fewer Net Exports?

January 01, 2014

That’s what readers of a NYT article on Latvia entering the euro would assume. The piece presented it as good news that the euro had risen against the dollar over the last year. This increase will make the goods and services produced by euro zone countries less competitive in the world economy, reducing their exports and increasing their imports. With nearly all of the euro zone countries operating at levels of output well below potential GDP, it is difficult to see why they would view this loss of demand as a positive development.

The article also quoted a statement by Olli Rehn, vice president of the European Commission responsible for economic and monetary affairs, in which he referred to Latvia’s strong recovery. It would have been useful to note that even with the recent growth it has experienced Lativia’s economy is still almost 10 percent smaller than its pre-recession peak in 2007.

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