Even more important is the fact that this adjustment is being driven not just by shrinking imports but also by growing exports. All the crisis countries’ exports are likely to edge higher this year, with growth ranging from just under 1% in Portugal to roughly 4% in Spain. The crisis countries haven’t made quite as much progress in tackling their government debt.
They have undoubtedly made dramatic inroads into their annual fiscal deficits in recent years. But despite all their efforts, they will all still be above the Maastricht Treaty’s 3% deficit limit this year. At the same time, their debt levels continue to grow. At the end of this year, Greece’s sovereign debt will be more than 170% of the country’s annual GDP.