The EU economy after the great recession Pier Carlo Padoan, Italian - - PowerPoint PPT Presentation

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The EU economy after the great recession Pier Carlo Padoan, Italian - - PowerPoint PPT Presentation

Sep 06, 2022 334 likes •568 views

The EU economy after the great recession Pier Carlo Padoan, Italian Minister of Economy and Finance LSE Tuesday 29 April 2014 THE EUROPES ADJUSTMENT Eurozone adjustment: several dimension Fiscal consolidation Internal devaluation in

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The EU economy after the great recession

Pier Carlo Padoan, Italian Minister of Economy and Finance LSE Tuesday 29 April 2014

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Eurozone adjustment: several dimension

  • Fiscal consolidation
  • Internal devaluation in the periphery
  • Banking system repair
  • A comprehensive common European growth

strategy is still lacking

THE EUROPE’S ADJUSTMENT

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GDP is recovering in core countries, but slower than in US. The periphery is still lagging

KEY FACTS

  • 6.0%
  • 4.0%
  • 2.0%

0.0% 2.0% 4.0% 6.0% 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 GDP year-on-year Eurozone Core Periphery United States

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Domestic demand is recovering in core countries

KEY FACTS

  • 6.0%
  • 4.0%
  • 2.0%

0.0% 2.0% 4.0% 6.0% 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 Eurozone Core Periphery

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Market confidence almost restored: interest rates are converging

KEY FACTS 5 10 15 20 25 30 35 40 45 10 year govies yield Germany Periphery (excluding Greece) Greece

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Credit fragmentation: little improvement

KEY FACTS

  • 16
  • 12
  • 8
  • 4

4 8 12 16 20 24 28 32 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Loans, % year-on-year Euro Area Germany Spain France Italy

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Interest rates on loans: the gap is still wide

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KEY FACTS 1.0 2.0 3.0 4.0 5.0 6.0 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Germany Spain Italy Euro area France

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Public finances are now less vulnerable

KEY FACTS

  • 5.0
  • 4.0
  • 3.0
  • 2.0
  • 1.0

0.0 1.0 2.0 3.0 4.0 2006 2007 2008 2009 2010 2011 2012 2013 Primary balance, % of GDP Eurozone Core Periphery

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Europe has lost market shares since 2004, well before the crisis

THE WEAK POINTS OF EUROPE 28 29 30 31 32 33 34 35 36 37 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 World trade share

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The US economy has succeeded in defending its market share

THE WEAK POINTS OF EUROPE

USA 10.7% China 6.5% Eurozone 34.9% Rest of the word 58.6%

2003

USA 10.2% China 13.5% Eurozone 28.7% Rest of the word 57.8%

2012

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Asymmetric correction of current account imbalances in the Eurozone

THE WEAK POINTS OF EUROPE

  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Percentage of GDP Euro area Core Periphery United States

Source: OECD.

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How much market reforms could foster economic growth

  • The European Commission estimated that enforcing the

Service Directive would boost GDP by 0.8% over a 5-10 year period (2.6% in case of full implementation)

  • In Italy structural reforms already introduced would lead to

2.5% additional GDP in 2020 (of which 1.2% for liberalization and simplification)

THE WEAK POINTS OF EUROPE

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Product market regulation improving in Europe

THE WEAK POINTS OF EUROPE 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Eurozone Core Periphery 2008 2013

Source: OECD, Product Market Regulation Database.

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Output gap in the Eurozone still close to -3%

THE WEAK POINTS OF EUROPE 1.6

  • 3.5
  • 2.1
  • 1.2
  • 2.2
  • 3.0
  • 5
  • 4
  • 3
  • 2
  • 1

1 2 3 2008 2009 2010 2011 2012 2013

Source: European Commission.

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Low confidence and weak competition breed low investment and low investment breeds low growth

THE WEAK POINTS OF EUROPE

  • 3.0
  • 2.5
  • 2.0
  • 1.5
  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Contribution of investment to GDP growth Eurozone United States Japan

Source: Eurostat.

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Low investment implies weak innovation

THE WEAK POINTS OF EUROPE 1.0 1.3 1.5 1.8 2.0 2.3 2.5 2.8 3.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 R&D as percentage of GDP Eurozone United States China

Source: Eurostat.

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Weak growth of TFP in Europe

THE WEAK POINTS OF EUROPE 90 92 94 96 98 100 102 104 106 108 110 2000 2002 2004 2006 2008 2010 2012 2014 Index 2005=100 Eurozone USA

Source: Eurostat.

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Increasing unemployment in Europe, mainly in peripheral countries

THE WEAK POINTS OF EUROPE 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Percentage of active population Euro area Periphery United States

Source: Eurostat.

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Employment lagging in Europe, declining in peripheral countries

THE WEAK POINTS OF EUROPE 50.0 55.0 60.0 65.0 70.0 75.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Percentage of active population Euro area Periphery United States

Source: Eurostat.

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Low growth and resource misallocation increase inequality. Inequality slows down consumption and growth

THE WEAK POINTS OF EUROPE 37.5 37.8 38.0 38.3 38.5 38.8 39.0 39.3 39.5 7.5 7.6 7.7 7.8 7.9 8.0 8.1 8.2 8.3 8.4 8.5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Poorest 20% (left scale) Wealthiest 20% (right scale)

Note: Share of «equivalised» income in the Eurozone. Source: Eurostat, EU Silc.

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