Germany’s external surplus and France’s external deficit: Is it really a competitiveness issue?

Germany’s sizeable external surplus contrasts with France’s small external deficit. If we look only at foreign trade in industrial products, we see a huge external surplus in Germany and a fairly significant external deficit in France. This gap between Germany’s and France’s current account balances is usually interpreted as a reflection of Germany’s competitiveness advantage over France (thanks to product sophistication, quality, etc.). But it is important to consider savings rates: the household savings rate is higher in Germany than in Fran ce; Germany has a fiscal surplus and France a deficit. What would remain of the current account balance gap between Germany and France if their savings rates were the same? We show that in 2018: Germany’s external balance wa s 7.3 percentage points of GDP higher than that of France; 4.5 percentage points of this gap is explained by the high level of savings in Germany; and only 2.8 percentage points by France’s competitiveness problems.