ECB: Taking stock - where do we stand in the crisis - by Jurgen Stark, 15-APR-2010

8/9/2019 ECB: Taking stock - where do we stand in the crisis - by Jurgen Stark, 15-APR-2010

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Taking stock:

where do we stand in the crisis?

Jrgen StarkMember of the Executive Board

and the Governing Council of the European Central Bank

Slides for the speech delivered at

BMW Stiftung Herbert Quandt,

Washington D.C., 15 April 2010


2/12

Fiscal developments in the euro area, the

United States, the United Kingdom and Japan

(1996-2011, percentage of GDP)

Budget balance, general government

Source: European Commisson's European Economic Forecast of autumn 2009

-15.0

-10.0

-5.0

0.0

5.0

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

United States

Japan

Euro area

United Kingdom

(1996-2011, percentage of GDP)

Gross debt, general government


35.0

60.0

85.0

110.0

135.0

160.0

185.0

210.0

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

United States

Japan

Euro area

United Kingdom


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General government fiscal development

percentage of GDP

2008 2011 2008 2011

United States -6.4 -13.2 70.7 105.8

Japan -3.8 -9.1 173.1 206.0

Euro area -2.0 -6.5 69.3 88.2

United Kingdom -5.0 -11.1 52.0 88.2


Budget balance Gross debt


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Fiscal developments: euro area countries


Budget balance, general government

(percentage of GDP)

IE

GR

ES

PTSI

NL SK BE CYAT IT DE

FI MT LU

FR

-20

-15

-10

-5

0

5

10

2007 2010


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Fiscal developments: US budget gaps by State(as a percentage of the respective General Fund budget)

0%

5%10%15%

20%

25%30%

35%

40%45%

50%55%

60%

Arizona

C

alifornia

RhodeIsland

Florida

Nevada

NewJersey

Massa

chusetts

South

Connecticut

Idaho

TOTAL

Illinois

North

C

olorado

Virginia

Tennessee

NewYork

A

labama

D

elaware

W

isconsin

V

ermont

Georgia

Penn

sylvania

D

istrictof

Utah

M

aryland

Ohio

M

innesota

Indiana

Mississippi

Maine

Michigan

Wa

shington

New

K

entucky

Iowa

New

Mexico

Hawaii

Alaska

W

yoming

Oregon

Missouri

L

ouisiana

Kansas

A

rkansas

South

Dakota

Oklahoma

Texas

West

Virginia

Total Gap as Percent of FY2009 General FundTotal Gap as Percent of FY2010 General Fund

Source: Center of Budget and Policy Priorities.Note: Estimates as of December 2009. 2009 estimates are not available for Texas

and West Virginia. Total Budget Gaps refer to the gap before the budget was adopted plus the additional Mid-Year Gap.


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Euro area government debt scenarios:

assumptions on adjustment paths

Three scenarios:

Red: no policy change(annual change in primary balance pt = 0)

Orange: limited consolidation effort

(annual change in primary balance pt = 0.5)

Green: more ambitious consolidation effort

(annual change in primary balance pt = 1)


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Euro area government debt scenarios

Source: ECB simulations.

40

60

80

100

120

140

160

180

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

percentageofGDP

red scenario orange scenariogreen scenario 60 % of GDP

Note: debt scenarios do not cover the expected increase in the costs of ageing.


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Public debt scenarios for the Unites

States, the United Kingdom and Japan

United States

Source: ECB simulations.

United Kingdom Japan

40

60

80

100

120

140160

180

200220

240

260

280

300

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

percenta

geofGDP

red scenario orange scenariogreen scenario

40

60

80

100

120140

160

180

200

220

240

260

280

300

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

percen

tageofGDP

red scenario orange scenario

green scenario

406080

100120140160180200

220240260280300320340360380400420

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

percen

tageofGDP

red scenario orange scenario

green scenario

Note: debt scenarios do not cover the expected increase in the costs of ageing.


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Sources: ECB, Fed, BoE.

Balance sheets of the ECB, Fed and BoE(percentage of GDP)

0

2

4

6

8

10

12

14

16

18

20

2007Q2 2009Q4

FTOs and MLF

LTROs

MROs

Securities

General government debt

Net foreign asset s

ECB

0

2

4

6

8

10

12

14

16

18

20

2007Q2 2009Q4

Other assets

Repos and other loans

Securities held by s pecial entities

Mortgage-backed s ecurities

Federal Agency

Treasury

Net foreign ass ets

Fed

0

2

4

6

8

10

12

14

16

18

20

2007Q2 2009Q4

Long-term repos

Short-term monetary operations

Ass ets Purchasing Facility

Non monetary as sets excluding APF

BoE


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Background slides


11/12

Further risks to fiscal sustainability

arising from population ageing

10

10.5

11

11.5

12

12.5

13

13.5

14

14.5

15

2007 2010 2020 2030 2040 2050 2060

%o

fGD

P

Euro area

EU27

Public pension expenditure in the euro area and the EU, 2007-60

Source: European Commission and Economic Policy Committee (2009).


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Assumptions behind public debt scenarios

-6.1

1.4

0.2

197.6

Japan

-10.1-10.3-3.7Initial primary balance

(percentage of GDP) 4)

3.84.44.3The interest rate (percentage) 3)

4.64.83.4Nominal GDP growth

(percentage per annum) 2)

94.480.384.0Initial debt ratio (percentage of

GDP) 1)

Starting point 2010, simulations 2011onwards until 2030Time horizon

United

States

United

Kingdom

Euro area

1) The initial debt ratio is equal to the value for 2010 published in European Commissions autumn 2009 forecast.

2) The nominal GDP growth is equal to the average of nominal potential growth over 1995-2014 estimated in the IMF World Economic Outlook.

3) The nominal implicit interest rate on government debt is assumed constant at the value recorded in 2008 (as the values for the period 2009-10 could be

distorted by the financial crisis).

4) The initial primary balance is equal to the value for 2010 published in European Commissions autumn 2009 forecast.

ECB: Taking stock - where do we stand in the crisis - by Jurgen Stark, 15-APR-2010

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