key challenges for the cpccs on their way to the eu and emu · key challenges for the cpccs on...

Key challenges for the CPCCs on their way to the EU and EMU

Doris Ritzberger-GrünwaldOesterreichische Nationalbank

Joint Vienna Institute16 May 2014

ceec.oenb.at

www.oenb.at [email protected] 2 -

Trust in the European Union and National Governments

0%

10%

20%

30%

40%

50%

60%

70%

80%

Croatia Albania Bosnia andHerzegovina

FYR Macedonia Serbia Central EasternEurope

EU 28*

EU Government

Source: OeNB Euro Survey, average 2009-2013, *Eurobarometer, November 2013.

Note: The values represent the share of respondents answering that they "somewhat trust" or "trust completely" the respective institution. Excluding respondents answering "Don't know" or "No answer". Values for Central and Eastern Europe are the unweighted average for the Czech Repulbic, Hungary and Poland of the OeNB Euro Survey.


Trust in the Euro and Local Currencies

0%

25%

50%

75%

100%

Serbia Croatia Central EasternEurope

Bosnia andHerzegovina

Albania FYR Macedonia

Local Currency Euro

Source: OeNB Euro Survey, fall 2013.Note: Respondents where asked whether agree or disagree with the statement "Over the next 5 years, the [local currency / euro] will be very stable and trustworthy. Values for Central and Eastern Europe are the unweighted average for the Czech Republic, Hungary and Poland.


Expected Euro Introduction and Euroization

0%

10%

20%

30%

40%

50%

60%

70%

80%

Croatia Albania Bosnia and Herzegovina FYR Macedonia Serbia Central Eastern Europe

euro cash a foreign currency loan*

I Have Euro Cash / a Foreign Currency Loan Because my Country Will Introduce the Euro Sooner or Later.

in % of resondents with euro cash / FX loan

Source: OeNB Euro Survey, cash: 2007-2008, FX loans: 2008, 2010.Note: * Percentages are based on low number of observations, Central Eastern Europe only includes Hungary and Poland.


Asset Eurozation Index 2007-2012

Eurozation Index=(Euro Cash +Foreign Currency Deposits) / (Total Cash + Total Deposits)

Trust in the Euro – A Double-Edged Sword?

De facto use of the euro widespread phenomenon with important implications:

for the countries concerned: conduct of monetary and fiscal policy.

for the euro area: euro cash in circulation abroad for both: foreign currency loans

OeNB Euro Survey of Households• Semi-annual survey conducted since 2007• Representative sample of 1000 respondents per

country & survey wave• Content of survey:

distribution of foreign currency assets and liabilities, actual and planned portfolio structure, sentiments, memories and expectations


A Double-Edged Sword? Liability Euroization

0%

5%

10%

15%

20%

25%

30%

HR AL BA MK RS CEE

Yes, in Foreign Currency. Yes, in Local Currency.

Do you have a loan?

Source: OeNB Euro Survey.

0%

5%

10%

15%

20%

25%

30%

2008 2013 2008 2013 2008 2013 2008 2013 2008 2013 2008 2013

HR AL BA MK RS CEE

Do you plan a loan?


Non-Performing Loans – FX Driven?

Income versus Installment Shocks Financial Difficulties due to FX Loans

“I know someone who has gotten burned on a foreign currency loan because repayments became much higher than expected.”

0%

25%

50%

75%

100%

HR AL BA MK RS

Earnings DroppedLoan Installments Increased

Self-Reported Reasons for Loan Arrears% of respondents in loan arrears

Source: OeNB Euro Survey, average 2010-2013.


Bank Services – Addressing Households’ Needs?

Formal versus Informal Borrowing

“Generally speaking, would you have the possibility to borrow a significant amount of money from a bank / friends or family?”Values show percentage of respondents who respond “yes, almost certainly” or “yes, probably.”

Perceived Distance to Nearest Bank

“For me, it takes quite a long time to reach the nearest bank branch.”

0%

10%

20%

30%

40%

50%

60%

HR AL BA MK RS CEE

...familiy or friends ...a bank.

Perceived Possibility to Borrow a Significant Amount From…

Source: OeNB Euro Survey, Fall 2013.


Expectations– Persistent Due to Memories of Previous Crises?

Foreign Currency Deposit DemandDepreciation Expectations of the

BG

CZ

HR

HU

PL

RO

AL

BA

MK

RS

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

2012

/ 2

013

2007 / 2008

Local Currency against Euro

Source: OeNB Euro Survey.

0%

20%

40%

60%

80%

100%

HR AL BA MK RS CEE

Euro US Dollar CHF Other Local Currency

Preferred Currency for Savings Desposit

Source: OeNB Euro Survey, fall 2013.

key challenges for the cpccs on their way to the eu and emu · key challenges for the cpccs on...

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