Where is the savings equilibrium in the euro zone heading?

- "We can imagine the following developments as regards the savings equilibrium in the euro zone:
• fiscal deficits are reduced, but this reduction does not lead to a fall in the household savings rate;
• the reduction in fiscal deficits also takes place before corporate and household investment picks up again;
• corporate savings (profits) improve due to the distortion of income sharing at the expense of wage earners."
- "So there will be a savings glut in the euro zone, leading to:
• an external surplus, which is likely to contribute to an appreciation of the euro;
• an additional fall in risk-free long-term interest rates (long-term interest rates on Bunds, OATs, swaps, etc.)."

Natixis Flash Economics 393 20100806

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