Transcript Slide 1
The Eurozone context Is there a proper identification of the crisis’ causes? Lucian Croitoru IIP (% of GDP) Public debt (% of GDP) LT Yield (latest, bonds maturing in 2018) Euro area 2010 -13.3 2010 85.6 Bulgaria -97.7 16.3 4.3 Czech Republic -49.0 37.6 3.8 Ireland -90.9 94.9 9.0 Greece -92.5 144.9 35.7 Spain -89.5 61.0 4.5 Italy -23.9 118.4 6.2 Hungary -112.5 81.3 9.0 Poland -64.0 54.9 4.8 Portugal -107.4 93.3 16.0 Romania -65.3 31.0 6.6 US -17.0 95.2 1.5 Source: Eurostat, US Department of Commerce, WEO Database, Bloomberg - Exposure of US-owned banks on EA and PIIGS share in total claims (%) share in total claims (%) 34 9.5 33 share of claims on the euro area in total claims of US owned banks 9.0 32 share of claims on PIIGS in total claims of US banks (rhs) 8.5 Source: BIS Database Sep.11 Jun.11 Mar.11 Dec.10 Sep.10 Jun.10 Mar.10 Dec.09 Sep.09 Jun.09 4.0 Mar.09 23 Dec.08 4.5 Sep.08 24 Jun.08 5.0 Mar.08 25 Dec.07 5.5 Sep.07 26 Jun.07 6.0 Mar.07 27 Dec.06 6.5 Sep.06 28 Jun.06 7.0 Mar.06 29 Dec.05 7.5 Sep.05 30 Jun.05 8.0 Mar.05 31 What is the nature of the crisis? • The fiscal malfeasance? • The balance of payments crisis? • The decisions should be different, depending the nature of the crisis • The European leaders think of a fiscal nature of the crisis • Based on data, one may think of a balance of payments crisis • If the competitiveness is the real problem, than the solutions are of two folds: • An external adjustment. Specifically, shifts in competitiveness • Looser macropolicies to alow higher inflation and higher credit growth in surplus countries Budget deficits and public debts Fig. 1: Average budget deficits (% of GDP) in the periods 19972007 and 2009-2010 Finland Luxembourg Ireland Estonia Spain Belgium Netherlands Austria Germany Slovenia France Cyprus Italy Portugal Slovakia Malta Greece Red for 2009-2010 Blue for 1997-2007 -25 -20 -15 -10 -5 0 5 Fig. 2: Deviation of the public debt from the 6o-percent of GDP benchmark in the period 1999-2010 Italy Greece Belgium Austria Cyprus Germany Malta France Portugal Sweden Netherlands Spain Finland Slovakia Ireland Slovenia Estonia Red for 2010 (5 of GDP) Blue for 1997-2007 (average, % of GDP) -80 -60 -40 -20 0 20 40 60 80 Fig. 3: Budget deficits in the euro-zone in the period 19902007 Finland Luxembourg Ireland Estonia Spain Belgium Netherlands Austria Germany Slovenia France Cyprus Italy Portugal Slovakia Malta Greece Greed for 1990-1998 (average, % of GDP) Blue for 1997-2007 (average, % of GDP) -12 -10 -8 -6 -4 -2 0 2 4 6 Current account deficits Fig. 4: Current account deficits in the euro-zone in the period 1997-2010 (% of GDP) Luxembourg Finland Netherlands Belgium Germany Austria France Italy Ireland Slovenia Cyprus Spain Malta Slovakia Greece Portugal Estonia -15.0 Red for 2009-2010 Blue for 1997-2007 -10.0 -5.0 Perioada 2009-2010 0.0 5.0 Perioada 1997-2007 10.0 15.0 Fig. 5: Current account deficits in the euro-zone in the perod 1990-2007 Luxembourg Finland Netherlands Belgium Germany Austria France Italy Ireland Slovenia Cyprus Spain Malta Slovakia Greece Portugal Estonia Green for 1990-1998 (average, % of GDP) Blue for 1999-2007 (average, % of GDP) -12 -8 -4 0 4 8 12 Fig. 6: External deficits of the private sector in the period 1999-2010 Luxembourg Netherlands Germany Belgium France Austria Italy Finland Slovenia Malta Slovakia Cyprus Greece Ireland Portugal Spain Estonia Blue for 1997-2007 Red for 2009-1010 -15 -10 -5 0 5 10 15 20 Unit labor costs Fig. 7: Deviations of labor productivity (LP)’ and nominal compensations per employee (NCE)’ growth from their averages in the euro-zone in the period1999-2007 Estonia Slovakia Ireland Greece Slovenia Cyprus Portugal Netherlands Malta Luxembourg Spain Finland Italy Belgium France Austria Germany Blue for LP Red for NCE -2 0 2 4 6 8 10 12 Fig. 8: Deviations of labor productivity (LP)’ and nominal compensations per employee (NCE)’ growth from their averages in the euro-zone in the period 2008-2010 Slovakia Slovenia Spain Finland Portugal Cyprus Italy Estonia Netherlands Austria Malta Greece Luxembourg France Belgium Germany Ireland Blue for LP Red for NCE -4 -2 0 2 4 6 8 Fig. 3: Deviations of labor productivity (PM)’ and nominal compensations per employee (CAN)’ growth from their averages in the euro-zone in the period 2009-2010 Slovakia Slovenia Spain Finland Portugal Cyprus Italy Estonia Netherlands Austria Malta Greece Luxembourg France Germany Ireland Belgium Blue for LP Red for NCE -6 -4 -2 0 2 4 6 Conclusions from comparing fiscal deficits, public debt and current account deficits • Cash deficits select well Greece. But fail to select any other country if the 1999-2007 average fiscal deficts is considered • Public debt is also a imprecise measure: it rightly picks up Greece, Italy, Belgium and Portugal. But fails to pick up Estonia, Ireland and Spain, which performed better than Germany before the crisis • The current account deficits picks up Greece, Portugal, Italy, Ireland, Spain. Key decisions include • No compelling for private bondholders to take losses on euro-zone bail-outs. But voluntary restructuring remains • Some degree of automaticity of sanctions on countries that fail to stay within the limits on budget deficits • Requirements for balanced budget into domestic legislations • Introduction of the ESM in June 2012 • Monthly meetings of European leaders to oversee policy coordination