the global financial crisis: impact on gdp and government deficit in germany

© Statistisches Bundesamt, III B, Albert Braakmann

the Global financial crisis:

Impact on GDP and Government deficit in

Germany

OECD Working Party on National Accounts,Paris, November 04-06, 2009

- Draft -

© Statistisches Bundesamt, IIIB, Albert Braakmann 21.04.23 Folie 2

1. INTRODUCTIONIngredients of the global financial crisis:

- Subprime loans

- Securitisation and structured financial products

- Mismatch: short-term financing of long-term securities

- Decreasing house prices


Change of financial assets Due to saving … Due to holding gains/losses


9 - 15


Part 2

Impact on General Government Deficit


Governments‘ support measures for banks:

Industrie- und Kreditbank, IKB

-Sachsen LB

-West LB

-Commerzbank AG

-Bayern LB

-Aareal Bank

-LB Baden-Württemberg

-HSH-Nordbank

-Hypo Real Estate (HRE)


Special Fund on Stabilization of financial markets (SOFFIN)*

Conditions: The use of the instruments is usually subject to conditions imposed by central government, concerning for instance the business policy, the salaries of managers, dividend payments.

*Founded by the Financial markets stabilization law of 17.10.2008 (BGBL. 2008, Teil I, p. 1982 ff.) and later amendments.

Instruments: a) Garantees on liabilities of financial enterprises (against fee)

-> up to 400 mrd. Euro (provision for calls: 20 mrd Euro)

b) Capital injections (against interests )

c) Purchase of impaired assets

-> b) + c) up to 80 mrd. Euro

Goal: Central government unit to stabile financial markets by overcoming liquidity shortages and strengthening the equity capital base of financial enterprises


Quelle: Der Spiegel 46/2008, S. 61 (10.11.2008


Frequent measures of stabilization

Foundation of special economic entities

Special Fund on Stabilisation of Financial Markets Special puposes entities (SPE)

Guarantees

Capital injections, recapitalisation

Purchase of impaired assets

Nationalisation


Background: Budget surveillance in the EU

Eurozone

-Excessive Deficit procedure (Maastricht Treaty 1993):- - max. 3% deficit ratio,

- max. 60% debt ratio.

Stability and Growth pact (1998) re-inforces deficit ratio.

Data transmission based on:

- European System of National Accounts (ESA) 1995,

- Uniform interpretation by Eurostat decisions.


Sector allocation of economic units:

1. Institutional unit (ESVG para. 2.12) ? Ownership of / exchange of goods and assets, Take economic decisions / responsibility, Incur liabilities and other obligations and commitments, as well as

entering into contracts, Keep accounting records

2. Controlled by general government ?

3. Market- or non-market producer (50% criteriuon)?

Example : German SOFFIN


Special case: SPEs like Bad banks

• a) Government-owned SPEs, If they conduct specific government policies without autonomy

of decision , they are inside the General Government sector.

b) Privately owned SPEs,

if their sole purpose is to address the financial crisis,

+ if they are created during the financial crisis with a finite life,

+ if the expected losses are expected to be small for government,

= are outside the general government sector

(even in case of a GG guarantee)


Garantees

A. General principles of ESA 1995:

In ESA 1995 a guarantee represents a contingent liability, which generally is not booked at the moment when agreed (ESA para. 5.05).

The call of a guarantee, on the other hand, is booked as capital transfer when the call occurs (ESA para. 5.16, 4.165f) .

Impact on net lending/borrowing of GG when called (and normally on gross debt of GG)


Capital injection / Recapitalisation

1. Shares and other equity not listed Transactions in shares and other equity of corporations and quasi-

corporations, which are not listed on stock markets, are to be treated as financial transactions:

The investor receives assets of the same value.

The investor receives a market rate of return (EU state aid rules).

Impact on net lending/borrowing of GG depends on circumstances (but normally impact on gross debt of GG)


2. Shares and other equity listed

Compare Purchaser price = market value

Depending on the test, there may be an impact on net lending/ borrowing (as well as on gross debt of GG).


Purchase of impaired assets

Purchase of securities (other than equity) and derivatives

Purchaser price = Market value

Purchaser price > Market value

No impact on net lending/borrowing of GG;

but normally impact on its gross debt (the purchaser price).

Impact on net lending/borrowing (difference between purchaser price and market value) of GG

(and normally on gross debt of GG via purchaser price.)


Nationalisation

Nationalisation = Aquisition of majority equity by General Government.

Cf. Capital injections and purchase of assets

N.B.: Seizure = Expropriation by general government

- with compensation

- uncompensated


Impact of financial markets stabilization measures on net lending/borrowing of General Government in 2008

Item Mill. EUR

Revenue 352

Guarantee fees receivable 52

Dividends and interests receivable 0

Capital transfers received 300

Expenditure 3 671

Interest payable 21

Capital transfers payable (3 650)

Capital injections recorded as deficit-increasing 2 150

Calls on guarantees 0

Other (impaired assets) 1 500

Net lending/ borrowing of GG -3 319


Impact of financial markets stabilization measures on gross debt of general Government 2008

Item

Gross debt

Mill. EUR

Loans 17 500

Securities other than shares 36 019

Total 53 519

N.B. Guarantees by GG (contingent liabilities)

( 66 300 )


Impact on GDP

Part 3


Real Gross Domestic Productunadjusted figures in %

– 8,0

– 6,0

– 4,0

– 2,0

0,0

2,0

4,0

6,0

1 Vj. 2 Vj. 3Vj. 4 Vj. 1 Vj. 2 Vj. 3Vj. 4 Vj. 1 Vj. 2 Vj. 3Vj. 4 Vj. 1 Vj. 2 Vj.

2006 2007 2008 2009Quelle: FS 18, Reihe 1.2


Real Gross Domestic Product + Employeesin % to previous year

– 8,0

– 6,0

– 4,0

– 2,0

0,0

2,0

4,0

6,0


2006 2007 2008 2009

Real Gross Domestic Product Employees


Real Gross Domestic Product + Hours workedin % to previours year

– 8,0

– 6,0

– 4,0

– 2,0

0,0

2,0

4,0

6,0


2006 2007 2008 2009

Real Gross Domestic Product Hours worked by employees


Employees + Hours workedin % to previous year

– 6,0

– 5,0

– 4,0

– 3,0

– 2,0

– 1,0

0,0

1,0

2,0

3,0

4,0


2006 2007 2008 2009

Employees Hours worked by employees


Real Gross Domestic Product08/09 and 1st estimatein % to previous year

-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0


2006 2007 2008 2009

1. VÖ Stand: 08/09

© Statistisches Bundesamt, III B, Albert Braakmann

Many thanks for Your attention

Albert Braakmann Federal Statistical Office, Wiesbaden, Germany

the global financial crisis: impact on gdp and government deficit in germany

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