1 johan van overtveldt the long shadow of the euro
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THE EUROCRISIS IN PERSPECTIVE
JOHAN VAN OVERTVELDTMarch 2012
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DYNAMICS OF THE FOLLOW-UP CRISIS
REDUCTION IN AGGREGATE DEMAND
RECESSION
FINANCIAL CRISIS2008-2009
RISKAVERSION
HIGHINDEBTNESS
UNCERTAINTY
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“NEW” THREATS
REDUCTION IN AGGREGATE DEMAND
RECESSION
FINANCIAL CRISIS2008-2009
RISKAVERSION
HIGHINDEBTNESS
UNCERTAINTY
DYNAMICS OF THE FOLLOW-UP CRISIS
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LARGEST THREAT
EUROCRISIS
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EUROZONE: STRUCTURAL
FAULTS
COMPETITIVENESS CRISIS
SOVEREIGN DEBT CRISIS
BANKINGCRISIS
CRISIS IN 4D
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• POLITICAL UNION (incl. transfers)
SECOND BEST !
• FLEXIBLE LABOUR MARKETS
I. STRUCTURAL FAULTS
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II. SOVEREIGN DEBT CRISIS
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THE FISCAL CRISIS
% 2010 GDPEXPLICIT
DEBTIMPLICIT
DEBTTOTAL ONE-OFF
“SHOCK”
1 Italy 118,4 27,6 146,0 2,4
2 Germany 83,2 109,4 192,6 4,0
3 Finland 48,3 146,9 195,2 2,7
4 Austria 71,8 225,9 297,7 4,8
5 France 82,3 255,2 337,5 4,3
6 Portugal 93,3 265,5 358,8 6,5
7 Belgium 96,2 329,8 426,0 5,3
8 Netherlands 62,9 431,8 494,6 8,1
9 Spain 61,0 487,5 548,5 7,0
10 Greece 144,9 872,0 1 016,9 17,6
11 Luxembourg 19,1 1 096,5 1 115,6 12,0
12 Ireland 92,5 1 404,7 1 497,2 10,4
Source: Raffelhüschen & Moog
=+
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• SHORTAGE OF CAPITAL
EBA 115 mia €
“PRIVATE ESTIMATES” 200 - 400 mia €
• PERVERS MECHANISM (9 %)
• ECB
III. BANKING CRISIS
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IV. COMPETITIVENESS
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GermanySpainFranceGreeceIrelandItalyPortugal
Source: Deutsche Bank
UNIT LABOUR COSTS
2000 = 100
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CURRENT ACCOUNT (in % GDP)
Source: OESO-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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• ACUTE CRISIS TURNS INTO A CHRONIC CRISIS WITH HICKUPS– elections– downgrades– Germany
CONCLUSION
• EXIT GREECE (& PORTUGAL)
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UNEASY MARRIAGE WITH €
GERMANY
- UNDER VALUED €- EXTREMELY LOW FINANCING COST
- BUDGETARY COST- FINANCIAL STABILITY (ECB)
+
-
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THE COUNTRY IS IN DEPRESSION
GREECE
- CUMULATIVE DROP IN GDP BY END 2012: 15-20% OF GDP
- UNEMPLOYMENT ABOVE 20%
- ESCALATING DEFICITS & DEBT
- COST FOR SOCIETY & DEMOCRACY
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SECOND RESCUE PACKAGE
GREECE
- DEBT : + 160% → 120% ?!? NO !!!
- REINFORCEMENT OF RECESSION
- UNREALISTIC PROCEEDS OF PRIVATIZATIONS
- TWO CLASSES OF CREDITORS
- CONTAGION !
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Source: Mark Weisbrot & Juan Antonio Montecino
LOOK AT ARGENTINA !!!
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