british gri 2012 - keynote presentation
TRANSCRIPT
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European Sovereign Debt Crisis: Still Not Contained PETR ZEMCIK, DIRECTOR
Economic Outlook Conference, May 9-10, 2012
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Source: Moody’s Analytics
Expansion
In recession
At risk
Recovery
April 2012
Global Business Cycle Status
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5 5
0 50 100 150 200
Greece
Italy
Ireland
Portugal
Belgium
Euro area
France
U.K.
Germany
Spain
Netherlands
20012011E
Fiscal Burden Increases
Sources: European Commission, Moody’s Analytics
General government gross debt, % of GDP
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EFSF ESM
Institutional form
Private company owned by euro
zone states
Intergovernmental
organization
Capital structure
Guarantees and over-guarantees
from the euro zone countries
€80 billion paid-in capital,
€620 billion callable capital
Lending capacity
€440 billion; about €240 billion
remains €500 billion
Lending costs
Funding costs + 200 bps for 3
years, 300 bps afterwards Funding costs + 200 bps
Duration Until June 2013 From July 2012
Financing Intergovernmental decision Linked to the Treaty
European Firewalls May Not Suffice
How the EFSF and ESM Differ
Sources: European Financial Stability Facility, European Stability Mechanism, ECB,
Moody’s Analytics
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7 7
-15 -10 -5 0 5 10
Netherlands
Austria
Germany
Ireland
Euro area
Belgium
France
Spain
U.K.
Italy
Greece
Portugal
2011E
2012F
Macreconomic Imbalance Across Europe
Source: Moody’s Analytics
Current account, % of GDP
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8 8
-6
-4
-2
0
2
4
6
8
10
12
01Q3 03Q1 04Q3 06Q1 07Q3 09Q1 10Q3 12Q1
ECB Germany
Greece Euro zone
ECB Follows Taylor Rule
Policy rates in %, actual rate for ECB, Taylor rule based otherwise
Source: Moody’s Analytics
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9 9
0
5
10
15
20
25
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12
ECB bond purchases, € bil (R)
Italian 10-yr yield (L)
Spanish 10-yr yield (L)
ECB Becomes the Lender of Last Resort
Sources: Bloomberg, Moody’s Analytics
Government bond yields, %
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10
20
40
60
80
100
120
140
160
180
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
LTROs
Euribor-OIS
Libor-OIS
Inter-Bank Lending Has Been Improving
Sources: Bloomberg, Moody’s Analytics
Spread in basis points
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0
100
200
300
400
500
600
700
800
900
1,000
Aug Sep Oct Nov Dec Jan Feb Mar Apr
Banks Park Large Sums on ECB’s Deposits
Sources: Moody’s Analytics, ECB
Deposit facility, € mil
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Bond Yields Remain Elevated
Sources: Bloomberg, Moody’s Analytics
Generic 10-year government bond yields, %
0
5
10
15
20
25
30
35
40
4
6
8
10
12
14
16
18
20
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
LTROs
Italy (L)
Spain (L)
Portugal (L)
Greece (R)
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13 13
0
5
10
15
20
25
30
35
40
09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1
Tightening of credit lines
Expected tightening of credit lines
Credit To Private Sector Is Tightening
Sources: ECB, Moody’s Analytics
Net % of the euro zone banks reporting
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1.0
1.5
2.0
2.5
99 00 01 02 03 04 05 06 07 08 09 10 11
One year ahead
Two years ahead
Inflation Expectations Remain Subdued in Europe
Sources: ECB, Moody’s Analytics
HCPI forecast, % change
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15 15
-11 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1
IrelandGreeceCyprus
SpainPortugal
FranceSlovakiaSlovenia
NetherlandsItaly
BelgiumAustria
MaltaGermany
FinlandLuxembourg
Estonia
Most Euro Zone Countries Are in Deficit
Sources: European Commission, Moody’s Analytics
Fiscal balance in 2011, % of GDP
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0
1
2
3
4
5
6
7
8
9
10
11
12
Ireland Greece Portugal Spain France Italy
2010 2011E 2012F 2013F 2014F 2015F
Further Sharp Fiscal Consolidation Required
Sources: Eurostat, Moody’s Analytics
Budget deficit, % of GDP
31.3%
Maximum deficit allowed
under EU fiscal rules
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0
5
10
15
20
25
30
35
40
Greece Ireland Portugal Italy Spain
French banks German banks
French and German Banks Highly Exposed
Sources: Bank for International Settlements, Moody’s Analytics
Holdings of foreign debt, % of total, as of end Sep 2011
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18 18
-16
-12
-8
-4
0
4
8
01 02 03 04 05 06 07 08 09 10 11E
Ratio of fiscal deficit to GDP
Annual GDP growth
Fiscal Tightening Has Hurt Greece’s Economy
%
Sources: OECD, Moody’s Analytics
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19 19
97
98
99
100
101
102
103
104
105
10 11 12
OECD U.S.
Japan Russia
G7 Euro zone
Outside Strength May Provide a Bolster
OECD composite leading indicator index
Sources: OECD, Moody’s Analytics
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41%
30%
29% Euro zone
Rest of Europe
Other
The Majority of Germany Exports Go to Europe
Sources: German Federal Statistics Office, Moody’s Analytics
Export share by destination, 2010
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90
95
100
105
08 09 10 11 12F 13F 14F
Euro zone baseline Euro zone crisis
Source: Moody’s Analytics
Euro zone Crisis Scenario Real GDP, rebased 2008Q1=100
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90
95
100
105
110
115
08 09 10 11F 12F 13F
Euro zone Germany France
Italy U.K. U.S.
World
Sources: National Statistical Offices, Moody’s Analytics
Europe Falling Behind the Rest Real GDP, rebased 2008Q1=100
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-8
-6
-4
-2
0
2
4
6
07 08 09 10 11 12F 13F 14F
Greece Ireland Portugal
Greece and Portugal Stuck Deep in Recession
GDP, % change yr ago
Sources: Eurostat, National Statistics Offices, Moody’s Analytics
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24 24
-1
0
1
2
3
4
5
10 11 12F 13F
Poland
Czech Republic
Hungary
Germany
Polish Economy Outperforms CE
Real GDP growth, % change yr ago
Sources: National Statistical Offices, Moody’s Analytics
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25 25
0 5 10 15 20 25 30 35 40 45
The HagueRome
BrusselsBerlin
CopenhagenLondon
ParisHelsinkiLisbonViennaMadridAthens
StockholmWarsaw
VilniusLjubljana
BratislavaRiga
BucharestPrague
CE Capitals Less Exposed to Fiscal Risk
Source: Eurostat
Employment, public admin. & community service, % of total 2008
Central
Europe
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70
75
80
85
90
95
100
105
110
08Q1 08Q4 09Q3 10Q2 11Q1 11Q4* 12Q3* 13Q2*
Moscow Berlin
London Paris
Rome
European cities
Real GDP, SA, 2008 Q1=100
Source: Moody’s Analytics
* forecasts
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-15 -10 -5 0 5 10 15 20 25 30 35 40
Vienna
Gothenburg
Mosow
Stockholm
Bergen
Antwerpen
Oslo
Brussels
London
Budapest
Paris
St. Petersburg
Prague*
Barcelona
Warsaw*
Athens*
Madrid
Sofia
Tallin*
Dublin**
2003Q1-2008Q2
2008Q3-2011Q4
Notation:
* data begins after 2003Q1
** data until 2010Q4
Moscow & London Defy Country Trends
Source: Moody’s Analytics, Bank of International Settlements
Average quarterly y/y change of the house prices, %
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0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
02Q1 03Q1 04Q1 05Q1 06Q1 07Q1 08Q1 10Q3 11Q3
Bergen (NOR) Oslo (NOR)
Goethenburg (SWE) Stockholm (SWE)
Scandinavian House Prices Overtake GDP
Sources: Moody’s Analytics
Ratio of house prices to GDP per capita
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29 29
90
95
100
105
110
115
120
125
130
02 03 04 05 06 07 08 09 10 11
Price To Per CapitaGDPPrice To Rent
Swiss Real Estate Prices Rise 2002Q1=100, Owner-occupied Houses
Sources: SNB, Moody’s Analytics
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30 30
90
110
130
150
170
190
02 06 10
Zurich East Central
Northwest Bern South
Geneva West
Geneva and West Lead The Way Prices Single-Family Houses, 2002=100
Sources: SNB, Moody’s Analytics
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31 31
85
90
95
100
105
110
115
120
08Q3 09Q3 10Q3 11Q3 12Q3
Birmingham Bristol CardiffLeeds London ManchesterNewcastle
Forecast
In the U.K., Only London Remains Buoyant…
Sources: DCLG, Moody’s Analytics
Median sales price, existing homes, 2008Q3=100
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32 32
70
75
80
85
90
95
100
105
110
08Q3 09Q3 10Q3 11Q3 12Q3
Asturias BarcelonaBilbao MadridMalaga Las Palmas
…But in Spain, Madrid Is Almost the Weakest
Sources: INE Spain, Moody’s Analytics
Median sales price, existing homes
Forecast
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