At the end of the second quarter of 2007, the international investment position (i.i.p.) of the euro area showed net liabilities of EUR 1,174 billion vis-à-vis the rest of the world (around 13% of euro area GDP). This represented an increase of about EUR 140 billion in comparison with the revised data for the end of the first quarter of 2007, mainly as a result of exchange rate and price changes of stocks of foreign assets and liabilities.
Geographical breakdown of the euro area balance of payments for the second quarter of 2007
Current and capital accounts
The current account of the euro area b.o.p. recorded a deficit of EUR 1.4 billion in the second quarter of 2007 (see Table 1a). This was the result of deficits in income (EUR 19.5 billion) and current transfers (EUR 16.6 billion) that were partly offset by surpluses in goods (EUR 20.3 billion) and services (EUR 14.4 billion). The capital account recorded a surplus of EUR 2.6 billion, predominantly reflecting a surplus with the EU institutions.
The largest surpluses in goods were with the United States (EUR 15.1 billion), the United Kingdom (EUR 14.9 billion) and the countries that joined the European Union in 2004 and 2007 (EUR 13.5 billion). By contrast, deficits were recorded vis-à-vis “other countries” (EUR 24.0 billion) and Japan (EUR 5.2 billion).
The euro area services surplus was mainly accounted for by surpluses with the United Kingdom (EUR 5.9 billion), “other countries” (EUR 3.2 billion) and Switzerland (EUR 3.0 billion).
The euro area income deficit reflected deficits with the United States (EUR 15.0 billion), Switzerland (EUR 7.9 billion) and Japan (EUR 5.7 billion). By contrast, surpluses were recorded vis-à-vis the countries that joined the European Union in 2004 and 2007 (EUR 4.3 billion), “other countries” (EUR 3.3 billion) and the United Kingdom (EUR 2.5 billion).
The deficit for current transfers was predominantly with the EU institutions (EUR 9.9 billion) and “other countries” (EUR 9.0 billion).
The four-quarter cumulated current account of the euro area up to the second quarter of 2007 showed a surplus of EUR 10.4 billion (around 0.1% of GDP), compared with a deficit of EUR 28.0 billion a year earlier. This development was predominantly due to an increase in the goods surplus (from EUR 18.9 billion to EUR 54.1 billion), which was mainly accounted for by increases in the surpluses with the United Kingdom, Switzerland and the countries that joined the European Union in 2004 and 2007, and a decrease in the deficit with “other countries”.
Financial account
In the b.o.p. financial account, combined direct and portfolio investment was in balance in the second quarter of 2007, since net outflows in direct investment offset net inflows in portfolio investment.
From a geographical perspective, net outflows (EUR 69 billion) in direct investment mainly related to net outflows to “other countries” (EUR 26 billion), the United Kingdom (EUR 23 billion) and the countries that joined the European Union in 2004 and 2007 (EUR 13 billion).
Portfolio investment recorded net inflows of EUR 70 billion. Net purchases of foreign securities by euro area investors (EUR 150 billion) predominantly comprised debt instruments issued in the United States (EUR 57 billion), “other countries” (EUR 31 billion) and the United Kingdom (EUR 29 billion).
Other investment recorded net inflows of EUR 41 billion. These mainly resulted from net inflows from Switzerland (EUR 22 billion), the United States (EUR 20 billion) and the United Kingdom (EUR 10 billion), which were partly counterbalanced by net outflows to “other countries” (EUR 27 billion).
International investment position at the end of the second quarter of 2007
At the end of the second quarter of 2007, the i.i.p. of the euro area recorded net liabilities of EUR 1,174 billion vis-à-vis the rest of the world (representing around 13% of euro area GDP). This amounted to an increase of EUR 140 billion in comparison with the revised data for the end of the first quarter of 2007. This increase was mainly related to “other changes” (primarily revaluations, due to exchange rate and asset price changes). Foreign assets are mainly denominated in foreign currencies and foreign liabilities mainly in euro.
The change in the net i.i.p. largely resulted from increases in the net liability positions in portfolio investment (from EUR 1,566 billion to EUR 1,702 billion) and in other investment (from EUR 183 billion to EUR 272 billion), which were only partly offset by an increase in the net asset position in direct investment (from EUR 408 billion to EUR 495 billion).
