Is the EU just in a B.o.P. Crisis?

Michael Pettis thinks so...

Europe’s underlying problem is not budget deficits or even unsustainable debt.  The real problem with Europe is the huge divergence in costs between the core and the periphery – in the past decade costs between Germany and some of the peripheral countries have diverged by anywhere from 20% to 40%.  This divergence has made the latter uncompetitive and has resulted in the massive trade imbalances within Europe.

Options for Germany? Since the euro nixes the natural exchange mechanism for adjustment, the obvious choice is to reverse its own current account surplus.  Easy ways to do that?  Cut taxes or spend, spend, spend.