From Crisis to Recovery: The Challenges ahead for the European Economy

Transcription

1 From Crisis to Recovery: The Challenges ahead for the European Economy Moreno Bertoldi Head of Unit Countries of the G-20, IMF, G-groups European Commission COMEXI 24 June 2014

2 PART I: Current Economic Conditions

3 Global economic conditions 25 y-o-y% World trade and Global PMI manufacturing output 3-month moving average World trade volume, CPB data (lhs) Global PMI manufacturing output (rhs) Source: European Commission 30 3

4 Economic Forecast for the EU Spring 2014 Forecast for the EU GDP growth (%, yoy) -0,4 0,1 1,6 2,0 Inflation (%, yoy) 2,6 1,5 1,0 1,5 Unemployment (%) 10,4 10,8 10,5 10,1 Public budget balance (% of GDP) -3,9-3,3-2,6-2,5 Gross public debt (% of GDP) 86,8 88,9 89,5 89,2 Current account balance (% of GDP) 0.9 1,6 1,8 1,8 4

5 Economic Forecast for the Euro Area Spring 2014 Forecast for the EA GDP growth (%, yoy) Inflation (%, yoy) Unemployment (%) Public budget balance (% of GDP) -3,9-3,3-2,6-2,5 Gross public debt (% of GDP) Current account balance (% of GDP)

6 GDP and components, EU pps forecast Private consumption Government consumption Investment Net exports Inventories GDP (y-o-y%) 6

7 European growth map Source: European Commission

8 European growth map Source: European Commission

9 European growth map Source: European Commission

10 European growth map Source: European Commission

11 Sovereign bond markets Ten-year government-bond yields, selected EU Member States 8 % 6 DE FR UK ES IT Source: European Commission 11

12 Fiscal consolidation is showing results General government budget balance, euro area (SF2014) General government debt, EU and euro area (SF2014) 2 1 % of GDP pps % of GDP forecast forecast EA EU General goverment balance (lhs) Structural balance (rhs)

13 Rebalancing is progressing Fragile recovery in Europe, signs of a turnaround in vulnerable economies, internal rebalancing underway GDP growth (2008=100) Current account balance (% of GDP) index, 2008=100 forecast DE IE ES FR IT NL Euro area % of GDP forecast Surplus countries Deficit countries Euro area Note: The definition of surplus / deficit countries is based on the average current account balance in the period. Surplus countries: BE, DE, LU, NL, AT, FI; Deficit countries: IE, EL, ES, FR, IT, CY, MT, PT, SI, SK 13

14 what about inflation? 5 % 4 forecast Energy and unprocessed food [pps.] Other components (core inflation) [pps.] HICP, all items Source: European Commission 14

15 ECB Monetary policy decisions 05 June 2014 What: Reductions in the key ECB interest rates Interest rate on the main refinancing operations of the Eurosystem: 0.15% (-10 bp) Interest rate on the marginal lending facility: 0.40% (-35 bp) Interest rate on the deposit facility: -0.10% (-10bp) Targeted longer-term refinancing operations Intensify preparatory work related to outright purchases of ABS Prolongation of fixed rate, full allotment tender procedures Why: Provide additional monetary policy accommodation Support lending to the real economy Return of inflation rates to levels closer to 2% 15

16 PART II: THE LEGACY OF THE CRISIS

17 The impact is far-reaching in many countries Unemployment rates in % EU27 AT DE LU NL MT RO DK CZ UK FI BE SE EE SI PL FR HU IT BG LT IE CY LV SK PT HR ES EL % December 2007 March 2013

18 Investment in EA is low '09 '13 vs '09 '15 vs '13 DE FR IT UK US EA Source: Commission Winter Forecast

19 Credit conditions remain heterogeneous % selected Member States PT 4 3 ES IT 2 1 DE ES FR IT PT EA ene 12 abr 12 jul 12 oct 12 ene 13 abr 13 jul 13 oct 13 ene 14 EA FR DE Source: ECB 19

20 Conclusions PART II: - Despite good progress, many challenges remain - Debt will continue to be a drag on growth - Growth potential has been damaged by the crisis - Risk of social and political instability

21 PART III: REFORMS MUST CONTINUE

22 What remains to be done? Sustained action is needed at the national, and EU/EA level, both in the short term, and long-term: - Continue with a growth friendly fiscal consolidation - Step up the pace of structural reforms - Finalise financial sector repair - Complete the banking union - Promote non-bank finance 22

23 Growth-friendly fiscal consolidation Further adjustment is still required Key challenge: Growth-friendly fiscal consolidation Expenditure side: increase quality public expenditure, prioritising productive investment Revenue side: make the tax system more fair and efficient Increased fiscal responsibility is a lasting feature Improved surveillance and monitoring tools both at the MS and EA level 23

24 Structural reforms must continue Source: OECD Structural reforms needed to boost growth and facilitate rebalancing Vulnerable countries have made significant progress, but more is needed to spur external competitiveness. 24

25 Structural reforms must continue Source: OECD In these countries, combining labour market and product market reforms can mitigate negative short-term effects Less progress has been made in core countries Internal market needs to be completed, starting with energy 25

26 Complete financial repair ECB Comprehensive Assessment Supervisory Risk Assessment Asset Quality Review Stress Test Results in October Timebound correction for capital shortfalls 26

27 Complete the banking union Single supervisor Single resolution mechanism 27

28 Promoting long-term finance Measures to reduce reliance on bank finance Concrete initiatives to follow under the new Commission 28

29 THANK YOU 29