PARIS EUROPLACE INTERNATIONAL FINANCIAL FORUM Franois Villeroy de - - PowerPoint PPT Presentation

PARIS EUROPLACE INTERNATIONAL FINANCIAL FORUM

François Villeroy de Galhau Governor of the Banque de France

Tokyo, 5 December 2016

2

Economic recovery in the euro area

Source: Eurostat

70 75 80 85 90 95 100 105 110 70 75 80 85 90 95 100 105 110 2000 2002 2004 2006 2008 2010 2012 2014 2016 Euro area France Germany Italy Spain

Real GDP (2008Q1 = 100)

Last data: Q3 2016

3

Oil prices exert deflationary pressures

Harmonised index of consumer prices (HICP) in the euro area and oil prices

Source: Eurostat /Bloomberg

• 0,8%
• 0,4%

0,0% 0,4% 0,8% 1,2% €0 €10 €20 €30 €40 €50 €60 €70 €80 €90 Jan 2014 Jan 2015 Jan 2016 Jan 2017 headline inflation, euro area (left-hand scale) core inflation (excluding food and energy), euro area (left-hand scale) price per barrel of oil (euros, right-hand scale) Last data: nov. 2016

4

Accommodative monetary policy stance in the euro area

• 0,40

5 10 15 20 25 30 35

• 1

1 2 3 4 5 2008 2009 2010 2011 2012 2013 2014 2015 2016

ECB assets/GDP (right-hand scale) Interest rate on main refinancing operations Interest rate on the deposit facility Interbank overnight rate (EONIA)

% %

0,00

10 March monetary policy decisions:

 Cut in interest rates;  TLTRO 2: banks can borrow at favourable rates conditional on their lending to the economy;  Asset purchase programme: +20 bn EUR per month (total 80 bn) and corporate bonds now eligible;  Forward guidance: interest rates to remain at present or lower levels well beyond March 2017.

5

Rebalancing of unit labour costs

* Series corrected for the CICE (tax credit); Sources: BMPE June 2016 (confidential); Banque de France calculations

• 2,0
• 1,0

0,0 1,0 2,0 3,0 4,0 5,0 6,0

• 2,0
• 1,0

0,0 1,0 2,0 3,0 4,0 5,0 6,0 ZE FR DE IT ES ZE FR DE IT ES ZE FR* DE IT ES ZE FR* DE IT ES 1999-2007 2007-2009 2009-2014 2014-2017 BMPE June 2016 Forecast

Unit labour costs (ULC) : average annual percentage change

6

The investment crunch

15 16 17 18 19 20 21 22 23 24 25 1999 2001 2003 2005 2007 2009 2011 2013 2015 Euro area Investment Euro area Savings

as a % of GDP

7

Financial levers: Europe is lagging behind

Innovative investments New financing Equity capital needs

NFC liabilities: net equity capital and financial debt

as a % of GDP

Source: Banque de France; data as of end June 2016 70 67 88 125 70 71 67 45 20 40 60 80 100 120 140 160 180

France Euro area (excl. Germany) United Kingdom United States equity debt

8

Three steps towards economic union

A “Financing and Investment Union”

• Capital Markets Union + Juncker Plan + Banking Union
• Better channel abundant European savings (current account surplus
• f EUR 350 bn / year) towards productive investment across borders

A collective economic strategy

• Combine more structural reforms (France, Italy) and more fiscal

support (Germany)

• An institution fostering confidence: the euro area Finance Minister

In the longer term, a European fiscal capacity

• A euro area stabilisation tool: unemployment insurance scheme
• A means to finance certain « European public goods »
• The ability to issue common debt and even raise taxes