Get documents about "presentation_vandennoord
Document Sample
EUROPEAN COMMISSION
DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS
To sum economic
Reinforcing up...
policy coordination in EMU
Paul van den Noord
Economic adviser
Directorate-General
Economic and Financial Affairs
European Commission
Diagnosis
• Monetary union without fiscal union
• Captial mobile, labour not mobile
• PIGS got access to cheap liquidity
• Housing bubbles inflated
• Crowding out export activity
• Favourable gloss on fiscal position
• Bubbles burst with crisis
• Housing and sovereign crisis intertwined
2
GDP in the face of crisis
6
4
% year on year growth
2
0
t-12 t-8 t-4 t =0 t+4 t+8 t+12
-2
113 historical crises (median)
-4 US (current crisis)
EU (current crisis)
-6
Note: y-o-y grow th rates during tw elve quarters before and after the beginning (0) of a
finanical stress episode. T = 0 corresponds to 2007Q4. Dotted lines refer to forecasts.
Sources: IMF, OECD, European Commission.
3
% of GDP
U G
ni r
-15
-10
-5
0
te H eec 5
d un e
Ki ga
ng ry
Fr dom
2007
P o anc
R rtug e
om a
2008
an l
Source: Commission services
M ia
P al t
2009
Sl ola a
ov nd
ak
Eu ia
2010
r L
C ope ithu Italy
ze a a
ch n nia
Re Uni
E u pu on
ro bli
a c
Au rea
s
La tria
Be tv
i
4
Sl lgiu a
ov m
B u en
lg ia
N Ir ari
et e a
he la
Fiscal positions by Member State
n
G rlan d
er d
m s
a
S p ny
Es ai
t n
Lu C oni
xe yp a
m ru
b s
S w ou
D ed rg
en e
m n
F i ar
nl k
an
d
-3% Maastricht criteria
The crisis exposed imbalances within the
euro area
• Several members built up
huge external deficits, not
entirely justified by catch-up Current account positions
dynamics 39 2007
8
141 9
• Easy access to foreign 6 13
10
4
capital led to misallocation
2
of resources (overblown
% of GDP
0
construction activity, -2
housing bubbles, low -26 -43
-4
productivity) -6 Numbers indicate the -9
-8 absolute position,
• These countries were the -10
billions of euros
-15 -97
first to tank and need to -12 -25
boost competitiveness to NL DE FI AT BE IT FR IE PT ES EL
pick up the slack Source: European Commission.
5
Construction and current account
position
14
ES IE
13
Employment in construction, 2007 (%)
12
EE
LV LT LU
11
PT
10 CY
9
EL HU CZ
SL
8
SK IT
FI
7 FR
PL DK AT
BU RO
6 BE SE
NL
y = -0.1101x + 7.7797 UK DE
5
R2 = 0.185
4
-24 -20 -16 -12 -8 -4 0 4 8 12
Current account position, 2007 (% of GDP)
6
Source: Commi ssion services
Current account position and shock
exposure
2.0 PL
0.0
-2.0 EL CY MT FR
PT
BE NL LU
Growth of real GDP, 2009 (%)
ES AT
-4.0 UK
CZ
SK DK
BU SE
HU IT
-6.0 DE
RO
-8.0 IE SL FI
-10.0
y = -0.0168x 2 + 0.0068x - 3.6783
-12.0 R2 = 0.3221
-14.0 EE
LT
-16.0
-18.0 LV
-20.0
-24 -20 -16 -12 -8 -4 0 4 8 12
Current account position, 2007 (% of GDP)
Source : Commission services 7
Change in fiscal position and Change in fiscal position and real
2 employment in construction house prices
0
Change in fiscal balance 2007-2010 (%-
CZ
Change in fiscal balance 2007-2010 (%-
0
-2
points relative to GDP)
-2 BG
points relative to GDP)
MT -4 IT
-4 IT EL
AT
SK HU RO EE FR
SE FR
DE PO -6 DE EA
-6 BE NL EA SL LU
EU PT LT
LV -8 NL DK
-8
FI FI SE
UK DK UK
-10 -10
CY R2 = 0.1842
-12 -12
2
R = 0.1738 ES IE ES
IE
-14
-14
4 6 8 10 12 14 50 100 150 200
Employment in construction 2007 (% of total) Real house price index 2007Q4 (2000=100)
Sources: Commission services, OECD Sources: Commission services, OECD
8
Current account positions, euro-area surplus and deficit countries (1995-2011, in % of GDP)
12
Current-account surplus countries (1)
8 Current-account deficit countries (2)
4
0
-4
-8
-12
1995 1997 1999 2001 2003 2005 2007 2009 2011
(1) 4 MS with the largest pre-crisis surpluses (DE, LU, NL, AT)
(2) 4 MS with the largest pre-crisis deficits (EL, ES, CY, PT)
Source: Commission services. 9
Commission proposal
• Crisis prevention
– Reinforcing SGP compliance
– Broadening surveillance (competitiveness)
• Crisis management in case prevention
fails
10
SGP compliance
• European semester
• National fiscal frameworks
• Public debt in the EDP
• Sanctions (interest bearing deposits, EU
budget, cohesion funds)
11
Broader surveillance
• Europe 2020, Art 136
• Scoreboard to identify imbalances
• Country specific recommendations
• Council voting
12
Crisis resolution
• Financial assistance in the form of lending
(in respect of Art. 125)
• Conditionality
• Ensure operational package of 9 May
initiative
• Build on experience for permaent crisis
resolution mechanism
13
