This Great Graphic was posted on Economy View by Kostas Kalevras. It illustrates the shifting structure of German trade.
It is clear that the European periphery had to change and become more competitive. This process, even if not smooth and with some foot dragging at times, internal devaluations and structural reforms are changing the competitive landscape.
Less appreciated by many observers is that a periphery that is not leaving beyond its means as much and one that is experiencing falling unit labor costs will force Germany to change as well. How did the periphery live beyond their means for so long? German banks' exposure to the periphery in essence financed about half of German exports--a variant of producer financing.
The chart illustrates that the debt crisis and policy response in changing this. German exports cannot count on the periphery to absorb their output. German prowess and competitiveness, with what is a soft currency for domestic producers, is such that it has found alternative markets to the recessionary (or slow growing) EU and a more competitive periphery. The growth in the non-EU trade surplus has offset roughly three-quarters of its reduced EU surplus.