A weaker euro for a weaker Europe

What can be done to help the “crisis economies” of southern Europe reduce their external deficits? The debate is often presented as a conflict between the deficit-burdened PIIGS – Portugal, Italy, Ireland, Greece, and Spain – and the eurozone’s current-account-surplus countries, particularly Germany. But a new and more important imbalance has emerged in recent years: the PIIGS’ trade and services deficits with China, which suggest a possible solution to southern Europe’s economic malaise – a stronger renminbi.