What accounts for the euro zone’s excess savings?

An y analysis of economic policy choices in the euro zone must begin with one of the savings-investment equilibrium. Since 2012, the euro zone has had significant excess savings over investment, which are lent to the rest of the world, especially the United States, mainly in the form of bond purchases . This is highly inefficient. The euro zone’s excess savings must therefore be corrected. For this to happen, one needs to know what accounts for them. When we examine private savings, the current fiscal deficit (excluding public investment), public investment, housing investment and corporate investment in the euro zone, we see that the excess savings result from a rise in the private savings rate and a fall in public and housing investment. The expansionary monetary policy seems ineffective at correcting the excess savings, probably because the required return on corporate capital has not followed interest rates downwards, the private sector debt ratio is high and households have reacted to the very low interest rates by saving more. It is dangerous to permanently increase the current fiscal deficit. To correct the excess savings, this leaves the well-known option of efficient public investments, complementing private investments where possible.