ECB's Draghi certain German trade surplus contravenes regulations

LONDON (ShareCast) - The president of the European Central Bank, Mario Draghi, is certain that Germany's trade surplus is in breach of European Union regulations on "excessive" trade imbalances. Many leading experts have long chided the euro area's largest economy for what they say is taking advantage of the now-fixed currency arrangements versus its neighbours.

Berlin's retort is that Germany has done its homework in terms of holding labour costs down so as to defend the competitiveness of its industry.

To take note of, the single currency does not yet have any system set up for fiscal transfers. That is to say, there is no common pot of funds which can be shifted from one country to another to make sure that imbalances within the single currency area do not build up.

However, according to Market News International (MNI) on Wednesday, the Four Presidents' report to be released in June will propose creating a fiscal transfer union in Europe.

Unsurprisingly, the proposal has the backing of 10 countries, including France, Italy and Spain.

Germany remains in opposition.

Nonetheless, it could agree to the idea "in return for binding rules that would commit countries to structural reforms".