By Simon Miller
The UK has suffered the worst decline in share of exports in the last five years in the European Union according to the first EU Alert Mechanism Report.
The report, which aims to prevent future eurozone crises, said the UK saw its share of exports down 24.2% over the last five years at a time of soaring public debt.
The report said: “The UK has lost export market shares over the last decade, with the indicator being above the threshold, although some stabilisation can be noted in recent years. This loss of market shares has taken place despite a substantial depreciation of the REER in recent years.”
It continued: “ At the same time, the UK recorded current account deficits albeit below the indicative threshold. The high level of private debt is a concern also in a context of a weak public finance situation with high and increasing public debt.”
The report noted that household debt largely reflected mortgages in a context of high accumulated increases in house prices.
“While both the level of household debt and real house prices has been reduced, they still remain high which suggests that the unwinding of these imbalances has further to go where the speed of adjustment is an important aspect,” it continued.
As a result the UK joined 11 other countries* on a watch-list where they will be investigated under new EU ‘enhanced surveillance’ powers, however, the UK cannot be sanctioned if it is found to have persistent imbalances.
"Members states need to correct accumulated imbalances on both the internal and external side. They will have to reduce high levels of overall indebtedness and regain competitiveness so as to improve their growth prospects and export performance," said the report.
It concluded: "Despite overall good macroeconomic performance some countries display developments in asset markets, including in particular housing, and a continuous build-up of indebtedness in the private sector, which also warrant further analysis."
Olli Rehn, vice-president for Economic and Monetary Affairs and the Euro, said: "This crisis has highlighted risks that macroeconomic imbalances pose for financial stability, economic prospects and for the welfare of a country, its citizens and the European Union as a whole.
"Today, we kick-off an in-depth scrutiny of a country's macroeconomic situation as a first step. If it turns out that imbalances exist and that they are harmful, this new tool is a meaningful step towards correcting the imbalances which built up over the years. Sound fiscal policies and early detection and correction of risky economic imbalances are necessary conditions to return to sustainable growth and jobs."
The report can be found here.
*Belgium, Bulgaria, Cyprus, Denmark, Finland, France, Hungary, Italy, Slovenia, Spain and Sweden.