The news from Greece these days has been dominated by the announcement that the government achieved a primary budget surplus (the fiscal balance minus debt service) in 2013.

According to the International Monetary Fund, the budget deficit is declining, and the primary surplus (net revenues minus interest payments) is growing.

Russia is also thought to no longer need help because its economy and public finances are much improved, thanks to rising oil prices and a GDP growing at 6.5 per annum.

Indeed, Russia is running fiscal and current account surpluses of 2 and 17 of GDP respectively.

In that case, Germany s surplus means that the rest of Europe is in deficit.

These policies require Greece to maintain a very high primary budget surplus more than 4 of GDP for many years to come.

Budget presentation

So bringing the savings rate down is necessary if domestic and external balances are to be achieved.

If things go wrong, there are remedies a big budget surplus is an invitation to big tax cuts, which in America do work, and fast.

Indeed, if foreign owned enterprises exports are deducted from the total trade volume, the surplus vanishes, because both the overall balance of merchandise trade and the balance of trade in services normally run deficits.

Budget tightening will continue.

Shorting Fiscal Consolidation

More recently, Clinton defended the economic mainstream against attack by conservative Republicans, who pushed for deep tax cuts that would undermine the fiscal surpluses of recent years.

But the flip side of the trade surplus is the capital outflow.

The US has complained about China s current account (trade) surpluses but, as a percentage of GDP, Germany s surplus is even greater.

The False Promise of a Eurozone Budget

It all depends on one s budget.

(a) Procedures for the adoption of the national budget

Budget performance 2004

The fiscal deficit is higher than 6 of GDP, the trade balance is negative, and public debt albeit lower than in all other European countries except Germany and the Netherlands is nonetheless 80 of GDP.

With the global economy recovering, China s trade surplus began to grow.

Indeed, countries from Singapore to Russia are running large surpluses.

Results based budgeting

Inscription of a budgetary golden rule in the constitution

Buenos Aires maintains low debt levels and its service requires less than 3 of the budget.

China's current account surplus and export growth have, indeed, fallen.

China, the world s growth superstar, has a huge current account surplus, which means that it is a net lender to the rest of the world.

That country has a trade surplus. It exports more than it imports.

The budget deficit has been brought down sharply, and unemployment has declined.

This program must be funded from the state budget.

The United States paid 100 of the Lao military budget.

But John Maynard Keynes pointed out that surpluses lead to weak global aggregate demand countries running surpluses exert a negative externality on their trading partners. Indeed, Keynes believed that it was surplus countries, far more than deficit countries, that posed a threat to global prosperity he went so far as to recommend a tax on surplus countries.

Indeed, Keynes believed that it was surplus countries, far more than deficit countries, that posed a threat to global prosperity he went so far as to recommend a tax on surplus countries.

So its trade surplus continues to soar at the expense of other countries.

Given China s massive current account surplus (12 of GDP), the renminbi is still undervalued.

This is the strongest decline in net foreign demand facing a single country, or, equivalently, the strongest increase in a country s net demand for foreign goods.

(c) After their approval, the budget outline and strategic framework shall together form the basis for preparing the proposed programme budget

Partly by design and partly by chance, about a decade ago China found itself consistently accumulating large amounts of foreign reserves by running a trade surplus and intervening to buy up the dollars that this generated.

There is obviously some element of bluff in legislating balanced budgets.

A good starting point was the end of the Cold War which enabled the US to reduce military spending by around 2.5 of GDP (comparing 1990 and 2000), a saving worth around 225 billion per year.

So the policy prescription for solving the crisis seems simple austerity. Fiscal deficits must be cut to reduce debt levels.

Auditors have undoubtedly revealed some maladministration of parts of the budget.

The other scenario is that US budget deficits continue to run out of control.

There does need to be a commitment to fiscal responsibility.

This helped Clinton reduce the budget deficit in a rather painless manner.