But, since none of these countries has a national currency to devalue, they must substitute internal devaluation for external devaluation. They have to cut wages, pensions, and other costs in order to achieve the same gain in competitiveness needed to substitute external demand for internal demand.

But internal European Union studies indicate that European exports are more closely linked to changes in external demand than the euro dollar exchange rate. So long as external demand holds up and recent growth numbers from China and the US are positive in this regard Europe s exports should continue to perform well.

With favourable external conditions in 2004, economic policy in the region focused on demand management and on development with weaker financial constraints.

The standard way to buffer the effects of austerity is to marry domestic cuts to devaluation of the currency. Devaluation renders exports more competitive, thus substituting external demand for the domestic demand that is being compressed.

Economic growth is expected to moderate in 2005 in all three countries if the external environment weakens and uncertainty remains about the sustainability of domestic demand.

Given weak growth in external demand and an already large market share for many goods, China cannot count on export growth to sustain economic performance in the short run. And, though support for infrastructure investment by China s trading partners especially through the one belt, one road policy may help to strengthen external markets in the longer term, this is no substitute for domestic aggregate demand.

Noted in the reports is the need to take account of external factors, such as changing patterns of demand and the impact of substitutes, when assessing future needs.

This convergence will contribute to more sustainable economic growth, with Asia s economies rebalancing toward domestic demand, especially household consumption, and thereby becoming less vulnerable to external shocks. Given the decline in export demand since the global economic crisis, this shift could not be timelier.

Reducing dependence on external demand for example, by promoting private sector investment and encouraging household expenditure is crucial. Supply side policies that promote small and medium size enterprises and service industries accommodating domestic demand are also critical to ensuring more inclusive and sustainable growth.

The other 30 is also emblematic of a deeper strategic issue that America faces a profound competitive challenge. A shift to external demand is not there for the asking.

In the 1970s and 1980s, Japan was the envy of the world, owing to an all powerful export machine that tapped the demand of a rapidly growing global economy. Japan, Inc. still has a good institutional memory of what it takes to draw support from external demand.

Rebalancing also involves a global demand switch from external deficit countries to those running large current account surpluses. With lower spending and higher savings in the advanced economies, key emerging markets must take up the slack and start providing the demand needed to power the global recovery.

In fact, tourism is a highly demand driven industry, and it is characterized by high vulnerability to external factors such as natural risks, threats to health and security and simply fashion.

As the main driver of Chinese growth shifts from external to domestic demand, who could benefit more than Japanese exporters? China is already Japan s largest export market, leaving it ideally situated to capture additional market share in the coming surge of Chinese demand for consumer products and services.

The German model for resolving the debt crisis and returning to internal or external balance relies on fiscal consolidation and structural reforms for the deficit countries. But, if all countries simultaneously attempt to improve their fiscal or external balances by cutting spending and raising taxes, all will fail, because each country s austerity implies less demand for other countries output, in turn perpetuating both domestic and external imbalances.

China has elevated the reduction of external imbalances to a major national objective in 2007. It intends to boost domestic demand and is committed to moving gradually toward greater exchange rate flexibility.

It also means getting the balance between domestic and external demand right, and appreciating the sensitivity of medium and long term growth to the composition (and size) of domestic aggregate demand. Against this background, monetary policymakers must be cautious, because low interest rates can shift the growth model back toward leverage and domestic consumer demand, stalling the structural shift to the tradable side that is underway.

The driving force is external demand, as Germany, the world s second largest exporter, profits from the global boom. Exports increased by 6.2 in 2005 and are expected to increase by 7.4 in 2006.

Unexpected tasks prompted by external factors increase the strain on the secretariat's core staff and financial resources for example United Nations security requirements demand increased attention in Bonn and for events outside Bonn.

Two external shocks first from the US, and now from Europe have transformed the Four Uns into an action plan. Overly dependent on external demand from crisis battered developed economies, China has adopted the pro consumption 12th Five Year Plan, which lays out a powerful rebalancing strategy that should drive development for decades.

China is sensitive to downside risks to external demand more relevant than ever since crisis torn Europe and the United States collectively accounted for 38 of total exports in 2010. But India, with its large current account deficit and external funding needs, is more exposed to tough conditions in global financial markets.

The libraries will work with changing technologies to produce electronic collections of external materials on demand through the use of systems that provide access to multiple types of information resources held in different locations.

The impact on growth will almost certainly be negative, even if domestic demand compensates fully for the decline in external demand. The reason is microeconomic, not macroeconomic you can sell only so much steel or auto parts at home, and labor productivity in service industries does not match that of export oriented activities.

The euro, which is undoubtedly much weaker than the Deutschmark would have been, has also helped, by reducing the prices of German goods and preventing France and Italy from pursuing currency depreciation. Until recently, the euro also provided booming external demand in southern Europe, while China s breakneck industrial development raised demand for Germany s traditional exports.

Despite all the talk about the coming shift to internal demand, China remains heavily dependent on exports and external demand as major drivers of economic growth. It is not a coincidence that its last two slowdowns followed closely on the heels of growth slumps in its two largest foreign markets, Europe and the United States.

At the same time, financial markets are forcing fiscal retrenchment on governments, as will the planned new fiscal treaty (on which Germany, among others, insisted). Demand is therefore being drained out of the eurozone economies, with stronger external demand, stemming from the euro s depreciation against other major currencies, unable to offset the effect on growth.

In both cases, regaining monetary sovereignty allowed a more competitive currency, which in turn increased export demand and assisted economic recovery. Under Grexit, Greece's best hope would be something similar a sharp boost in external competitiveness.

With no growth in Germany, the rest of the eurozone might not be able to reduce debt via external surpluses. And there might be no solution short of a magic button to increase German domestic demand.

External

For China, which to some extent still depends on external markets to drive economic growth, this environment is particularly challenging especially as currency depreciation in Europe and Japan erode export demand further. Even without the crisis in major external markets, however, a large and complex middle income economy like China s could not realistically expect growth rates above 6 7 .

Even with significant policy support, however, most of the smaller Asian economies Taiwan, Thailand, Singapore, and even South Korea will not be able to replace external demand with internal demand to the same extent that China can. So, even with rebalancing, exports will remain a significant determinant of their growth, and China is already their major export market.

But now growth rates for Chinese exports and related indices in manufacturing have fallen, largely owing to weak external demand, especially in Europe. And the Chinese authorities are now scaling back the other major driver of their country s growth, public sector investment, as low return projects seem to generate aggregate demand but prove unsustainable fairly quickly.

This external dependence increases their vulnerability to external economic threats and shocks.

External auditors

External Auditor

External debt

External audit

External factors

External debt

External sector

Such crises cause major negative demand shocks, as excess debt and falling asset prices damage balance sheets, which then require increased savings to heal a combination that is lethal to growth. If the crisis occurs in a systemically important economy such as the US or Europe (emerging economies' two largest external markets) the result is a global shortage of aggregate demand.

External Entity Example

Haiti External debt

(d) External Relations

External public debt