Economic policy in Europe, Anders Borgs presentation Danske Bank 20131105
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Transcript of Economic policy in Europe, Anders Borgs presentation Danske Bank 20131105
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Finansdepartementet
Economic policy in Europe
Minister for Finance Anders Borg
November 5, 2013
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Finansdepartementet
Global growth prospects
• More stable recovery but subdued growth expectations in
the near term
– Euro zone out of recession, but fragmented financial systems
and high levels of public debt hamper growth
– United States: Economic activity is gradually picking up
supported by recovery in housing market
– Emerging markets are expected to grow at a slower pace
• More stable recovery but downside risks remain
– Uncertainty surrounding US fiscal policy could harm global
recovery
– Risk for continued financial turbulence in emerging markets due
to expectations of tapering of US monetary policy
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Finansdepartementet
-6
-4
-2
0
2
4
6
8
10
Emerging markets USA Euro area Sweden
IMF: Global growth in low gear GDP growth rate, per cent. Forecast from 2013
Source: IMF
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Finansdepartementet
Unit labour cost Index 2009 = 100. Source: OECD
Terms of trade Per cent of GDP, Forecast for 2014. Source: OECD
Interest spreads to German 10 year bonds Per cent. Source: Ecowin
0
5
10
15
20
25
30
35
40
2010-01 2010-07 2011-01 2011-07 2012-01 2012-07 2013-01 2013-07
Spain Greece Ireland Italy Portugal
-12
-10
-8
-6
-4
-2
0
2
4
6
2010 2011 2012 2013 2014
Portugal Greece Italy Spain Ireland
Improved fiscal conditions Public deficits 2010 and 2014. Per cent of GDP.
Source: EU-Commission
-30,9
80
85
90
95
100
105
110
2009 2010 2011 2012 2013 2014
Spain Greece Ireland Italy
-15
-10
-5
0
5
Irel
and
Gre
ece
Un
ited
Kin
gdo
m
Po
rtu
gal
Spai
n
Fran
ce
Net
her
lan
ds
Ital
y
Au
stri
a
Ger
man
y
Bel
giu
m
Fin
lan
d
Den
mar
k
Swed
en
-31
2010
2014
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Finansdepartementet
Fragmented financial systems
hamper recovery in crisis countries
• Weak financial system
with bad assets impair
transmission of
expansionary monetary
policy
• Restricted credit
availability to private
sector hampers
investment and growth
Source: IMF World Economic Outlook , 2013
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Finansdepartementet
Restoring household and business
confidence in the banking system
• Reveal banks’ bad assets and suppressed balance sheets
– Asset quality review and ECB stress tests in 2014
• Pan-European bank supervision
– Single Supervisory Mechanism
• Higher capital requirements increase resilience of the
banking system
– CRR / CRD 4 enter into effect in 2014
• Effective and orderly handling of banks in distress
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Finansdepartementet
Bank assets, percent of GDP,
December 2011
Source of funding, Swedish banks
House prices since 1995 Household debt to disposable
income ratio, 2012
Source: OECD Source: OECD
Source: ECB, Swiss national bank and Riksbanken
Source: Riksbanken, Statistics
Sweden Swedish krona Foreign currency
304 285
223
195 194
168
146 135 134
124 121 108 101 100 92 87
74
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Finansdepartementet
Sweden: Policies for financial stability
and increased supply of housing
• More robust financial system
– Stonger supervision
– Higher capital and liquidity requirements
– Minimum risk weights for mortgages
• Efficient crisis resolution mechanisms
• Housing market reforms
– Rent-setting for new appartments and sub-letting
– Faster planning processes for new developments
– Improved incentives for new-builds (e.g. in Stockholm)
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Finansdepartementet
Long term growth – a challenge for
Europe
• Highly regulated product and service
markets
• Rigid labour markets
• Sub-par performance of education systems
• Lack of entrepreneurship and innovation
• Under-investments in infrastructure and
research
• Heavy tax burdens on labour and capital
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Finansdepartementet
Structural labour market problems in
Euro area NAIRU (USA) and NAWRU (EZ)
Källa: CBO and European Commission
4
5
6
7
8
9
10
11
12
97 99 01 03 05 07 09 11 13
USA Euro area
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Finansdepartementet
High levels of public debt in Europe
EU15 except Luxembourg Source: EU-commission autumn forecast 2013
Public deficits 2014. Per cent of GDP
Public sector debt 2014. Share of GDP, per cent
0,1
-1,2
-1,7
-1,9
-2,0
-2,3
-2,6
-2,7
-3,3
-3,8
-4,0
-5,0
-5,3
-5,9
Ge
rman
y
Swe
de
n
Den
mar
k
Au
stri
a
Gre
ece
Fin
lan
d
Bel
giu
m
Ital
y
Ne
ther
lan
ds
Fran
ce
Po
rtu
gal
Ire
lan
d
Un
ite
d K
ingd
om
Spai
n
42
44
61
75
76
77
95
97
10
0
10
1
12
1
12
7
13
4
17
6
Swe
de
n
Den
mar
k
Fin
lan
d
Au
stri
a
Ne
ther
lan
ds
Ger
man
y
Fran
ce
Un
ite
d K
ingd
om
Spai
n
Bel
giu
m
Ire
lan
d
Po
rtu
gal
Ital
y
Gre
ece
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Finansdepartementet
Eurozone economies in need of
structural reforms
• Reforms to strengthen public finances
– Raise retirement age and reduce inflow to early retirement
– Impose stricter conditions surrounding unemployment benefits
– Reduce indexation of government expenditures
– Broaden tax-bases
• Reforms to increase long-tem competitiveness
– Increase incentives to work
– Invest in education and training
– Improve infrastructure, conditions for R&D and entrepreneurship
– Increase flexibility in labour and product markets and reduce red tape
– Improve efficiency of tax systems and public expenditures
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Finansdepartementet
Sweden: Growth enhancing policy
agenda
• Budget bill 2013: Strengthen Sweden’s
competitiveness
– Investments in infrastructure, research, education and
lower corporate tax rate
• Budget bill 2014: Increase domestic demand
and improve youth employment prospects
– Lower income tax rates, reduced fees for unemployment
insurance, youth labour market reform
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Finansdepartementet
0
10
20
30
40
50
60D
anm
ark
Fran
krik
e
Fin
lan
d
Bel
gien
Gre
klan
d
Sver
ige
Öst
erri
ke
Ital
ien
Ned
erlä
nd
ern
a
Po
rtu
gal
Sto
rbri
tan
nie
n
Irla
nd
Tysk
lan
d
Spa
nie
n
2000 2011
-8
-6
-4
-2
0
2
4
Sw
ed
en
Fin
lan
d
Sp
ain
Ge
rman
y
Ire
lan
d
Gre
ec
e
De
nm
ark
Ne
the
rla
nd
s
Belg
ium
Au
str
ia
Un
ite
d K
ing
do
m
Fra
nce
Ita
ly
Po
rtu
ga
l
-8
-6
-4
-2
0
2
4
Sw
ed
en
De
nm
ark
Fin
lan
d
Gre
ec
e
Ge
rman
y
Be
lgiu
m
Fra
nce
Irela
nd
Un
ite
d K
ing
do
m
Ita
ly
Au
str
ia
Ne
the
rla
nd
s
Sp
ain
Po
rtu
ga
l
-20
-15
-10
-5
0
5
10
Sw
ed
en
Fin
lan
d
Un
ite
d K
ing
do
m
Ne
the
rla
nd
s
Ge
rman
y
Au
str
ia
Po
rtu
ga
l
Be
lgiu
m
Fra
nce
Ita
ly
Public expenditures As per cent of GDP
Tax burden Change 2000 – 2011 as per cent of GDP
Implicit tax rate on capital Change 2000 – 2011 in per cent
Implicit tax rate on work Change 2000 – 2011 in per cent
Source: Eurostat
Source: Eurostat
Source: Eurostat Source: Eurostat
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Finansdepartementet
GDP-growth Average GDP-growth 2007–2012, percent
Real disposable income Percentage change 2007–2012
Source: OECD
Source: Eurostat Source: Eurostat
Active population, aged 15−74 Percentage change 2006Q3−2013Q2 (s.a.)
Employed population, aged 15−74 Percentage change 2006Q3−2013Q2 (s.a.)
Source: OECD
7,0 6,8
5,3 5,2 4,9 4,2
3,7 3,6 3,4 2,5
0,9 0,5
-1,1 -3,6
-6
-4
-2
0
2
4
6
8
Bel
gium
Sw
eden
Aus
tria
Spa
in UK
Net
herl
ands
Ital
y
Fran
ce
Ger
man
y
Gre
ece
Finl
and
Irel
and
Den
mar
k
Por
tuga
l
8,6 6,3 5,4 5,1
2,4 2,2 1,2 0,6
-2,5
-4,4 -9,1
-13,6 -15,5
-19,0
-25
-20
-15
-10
-5
0
5
10
Ger
man
y
Bel
gium
Sw
eden
Aus
tria
UK
Fran
ce
Net
herl
ands
Finl
and
Ital
y
Den
mar
k
Irel
and
Por
tuga
l
Spa
in
Gre
ece
1,4 1,2 1,1 0,8
0,5 0,5 0,4 0,1
-0,1 -0,2 -0,4 -0,5 -0,9
-3,0 -4
-3
-2
-1
0
1
2Sw
eden
Ger
man
y
Aust
ria
Bel
gium
Net
herl
ands
Fran
ce
Finl
and
UK
Irel
and
Spai
n
Den
mar
k
Port
ugal
Ital
y
Gre
ece
19,1
11,5
6,5 5,5 4,9 4,7 3,5 3,1 1,7
0,3
-1,3
-4,2 -8,3
-24,6
Sw
ede
n
Fin
land
Belg
ium
Fra
nce
De
nm
ark
Germ
any
UK
Austr
ia
Irela
nd
Port
ug
al
Ne
therl
and
s
Spain
Ita
ly
Gre
ece
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Finansdepartementet
Conclusions
• More stable growth prospects in near
term for Europe, but large remaining
challenges
• Functioning of banking systems must be
improved
• Need for structural reforms to
strengthen long-term growth