EU challenges, Investment and Investment Finance …...10 March 2014 1 EU challenges, Investment and...
Transcript of EU challenges, Investment and Investment Finance …...10 March 2014 1 EU challenges, Investment and...
10 March 2014 1
EU challenges, Investment and Investment Finance crisis,
and the Role of the EIB
Wilhelm Molterer and Debora Revoltella European Investment Bank
10 March 2014
Outline
• The EU challenges • The Investment and Investment Finance crisis • EIB contribution to jobs and growth
2
10 March 2014 3
EU real and potential growth Change in potential growth and its drivers - 2013 vs 2007
Gradual recovery, but the crisis has led to a significant reduction in EU growth potential
Source: Eurostat
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
AT NMS EU
2013
/200
7 TFP
Capital
Labour
Potential growth
Real GDP growth forecasts - 2014
10 March 2014 4
Evolution of EU growth and investments (2008 = 100)
Change in investment between 2008 and 2013 (in percent)
Investment has fallen across the EU but the drop is distributed unevenly across the membership
Europe is still in a deep investment crisis
Source: European Commission
80
85
90
95
100
105
2008 2009 2010 2011 2012 2013
% EU AT NMS
-60 -40 -20 0 20
ELCYIESIPTESBGHRLVMTITHULTRONLSKCZEU-28DKEEFIBEFRDELUATSEPL
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Unemployment rate (total) (in percent)
Unemployment rate (in percent)
The European employment crisis brings to the fore short and long term challenges
Source: Eurostat
10 March 2014
6
Productivity growth in the EU has trailed that in the US already before the crisis. The gap has widened since.
Europe is falling behind in terms of productivity growth
Average productivity growth for the EU, Japan and the United States
* For comparability only EU-OECD member countries considered
10 March 2014
Outline
• The EU challenges • The Investment and Investment Finance crisis • The EIB contribution to jobs and growth
7
European Investment Bank
Investment – structural differences
Gross fixed capital formation Gross fixed capital formation
Percent of GDP Percent of GDP, 2013
Source: AMECO, 2014 Winter Forecast
10
12
14
16
18
20
22
24
26
28
30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Gross fixed capital formation, current market prices, per cent of GDP
AT EU-28 OMC NMS
Forecast
0.0% 10.0% 20.0% 30.0%
EstoniaRomania
Czech RepublicLatvia
BulgariaAustria
BelgiumFrance
FinlandPoland
LuxembourgSlovakiaSwedenCroatia
SpainHungary
LithuaniaEU28
DenmarkGermanySlovenia
ItalyNetherlands
PortugalMalta
United KingdomGreeceIrelandCyprus
private public
Decline in gross fixed investment in the EU
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-40%
-30%
-20%
-10%
0%
10%
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
EU - Compared to avg 2008
Other investmentMachinery and equipmentNon-residential constructionResidential constructionTotal investment
-40%
-30%
-20%
-10%
0%
10%
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
EU Vulnerable Countries - Compared to the avg 2008
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A different story in Austria and in the NMS
Source: Eurostat
-40%
-30%
-20%
-10%
0%
10%M
ar-0
8
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Austria - Compared to avg 2008
Other investmentMachinery and equipmentNon-residential constructionResidential constructionTotal investment
-40%
-30%
-20%
-10%
0%
10%
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
New member States - Compared to avg 2008
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RDI investment gap
While some MS continued to close their RDI investment gap, RDI investment growth has stalled in others
Average annual growth in R&D expenditure in 2009-2011 and R&D intensity in 2008
Source: Eurostat
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R&D expenditures held up comparatively well
Source: Eurostat
-10%
-5%
0%
5%
10%
15%
20%
2000 2002 2004 2006 2008 2010 2012
Business Public Total
-10%
-5%
0%
5%
10%
15%
20%
2000 2002 2004 2006 2008 2010 2012
EU NMS Austria
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The impact of the crisis on investment performance
Source: Own calculations based on the Orbis database (Bureau van Dijk)
Nominal annual returns on investment by non-financial corporations in the EU
0%
3%
6%
9%
12%
15%
2005-2007 2008-2011
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The most immediate cause of the investment decline has been uncertainty
Source: Baker, Bloom, and Davis at www.PolicyUncertainty.com and Eurostat
Annual rate of change of business fixed investment against an index of economic policy uncertainty (1997-2012)
-20%
-15%
-10%
-5%
0%
5%
10%
50 70 90 110 130 150 170 190
2009
10 March 2014
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Finance is not a problem across the board, but it is a serious constraint for some firms
Source: Eurostat
Investment and savings by non-financial corporations in the EU (in EUR bn)
-400
0
400
800
1200
1600
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Gross savings Net lending (-) / borrowing (+)Net capital transfers Gross fixed capital formation
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On aggregate, Austrian firms are becoming net borrowers again
Source: Eurostat
Investment and savings by non-financial corporations in Austria (in EUR bn)
-10
0
10
20
30
40
50
60
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Gross savings Net lending (-) / borrowing (+)Net capital transfers Gross fixed capital formation
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Correlation between national investment and saving rates
15%
20%
25%
30%
35%
10% 15% 20% 25% 30%
Inve
stm
ent r
ate
Saving rate
2002-2007
15%
20%
25%
30%
35%
0% 10% 20% 30% 40%In
vest
men
t rat
e
Saving rate
2008-2011
Source: Wagenvoort and Torfs (2013) in Investment and Investment Finance in Europe, EIB Publication.
Before the crisis, financial markets of the EU were fully integrated, as measured by the independence of investment rates from saving rates. The crisis has reversed this development and made national borders within the EU obstacles again.
Financial fragmentation - the crisis has led to a collapse in intra-EU capital flows
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Source: Commission – ECB surveys on SME finance
Diverging access to finance conditions for SMEs
…leading to the availability of credit to SME varying significantly across the membership
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Cyp
rus
Net
herla
nds
Gre
ece
Lith
uani
a
Spai
n
Italy
Mal
ta
Rom
ania
Slov
akia
Cze
ch R
epub
lic
Portu
gal
EU UK
Den
mar
k
Hun
gary
Irela
nd
Bulg
aria
Esto
nia
Fran
ce
Belg
ium
Pola
nd
Finl
and
Aust
ria
Swed
en
Latv
ia
Slov
enia
Ger
man
y
Luxe
mbo
urg
Cro
atia
DK/NAApplied but refused because cost too highApplied and got most of it [BETWEEN 75% AND 99%]Applied and got everythingApplied but only got a limited part of it [BETWEEN 1% AND 74%]Applied but was rejected
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Main policy implications
Resolving uncertainty needs commitment and rapid progress on the EU institutional reform, including the Banking Union Public policy should seek to enhance bank lending and alternative finance sources where there is evidence of financing gaps Last but not least, with some countries suffering from persistently low investment returns, structural reforms that encourage a shift of resources to more productive activities need to be continued
Outline
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• The EU Challenges • The Investment and Investment finance crisis • The EIB contribution to jobs and growth
10 March 2014
The EUROPEAN INVESTMENT BANK at a glance
• Providing finance and expertise for sound and sustainable investment projects – EUR 512.5 bn loan book in 2013
• Natural financing partner for the EU institutions • Shareholders: 28 EU Member States • Largest multilateral lender and borrower in the world
• Raise our funds on the international capital markets • Pass on favourable borrowing conditions to clients
• AAA-rated and strong capital base • More than 400 projects each year in over 160 countries • Key products:
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2012/2013 - Total lending and staffing
Peer group of MDBs whose areas of operation include Europe
Notes: EIB accounts as at 31 December 2013. World Bank and IFC accounts as at 30 June 2013. EBRD accounts as at 31 December 2012. Loan portfolios are normally net disbursed loans. The IFC Portfolio (only) also includes equity investments. *IBRD only
23 European Investment Bank Group
2013 Borrowing activity
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EUR 72bn: distribution of EIB bond issues by region
24 European Investment Bank Group
Pre-accession Countries include: Candidate Countries: Iceland, the Former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey. Potential Candidate Countries: Albania, Bosnia and Herzegovina, Kosovo*.
Lending (signatures) in 2013: EUR 71.7bn
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25 European Investment Bank Group
Signatures and disbursements
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Growth and jobs
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Loans for SMEs & Midcaps
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‘Investing for Youth’ – EUR 9.1 billion, July-Dec 2013
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Investing in INNOVATION
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Investing in Energy
• 2013 Total in EU & Pre-accession – 10bn (focus on RE & EE)
EIB finances: • Sustainability through RE sources to reduce emissions
and dependence on finite energy resources • Competitiveness to create a genuine European single
energy market to boost efficiency and control consumer prices
• Technology to support energy-related research, development and innovation
• Supply security through diversification, particularly with indigenous sources to cut the risks from dependence on external supplies.
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Building Europe’s infrastructure
2013 in EU & Pre-accession: €11.6bn for transport projects(incl. TEN-T - favouring rail over roads) €4.2bn for urban renewal New tool – Project Bond (2 projects in 2013)
Responding to the EU challenges
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In one of the most advanced economies in Europe, the EIB can particularly add value by: • financing select projects that strengthen Austria’s ability to innovate by reallocating resources towards
high-tech sectors and supporting innovative SMEs; • financing TEN-T priority projects. Owing to its central location, Austria is part of six of these projects; • supporting the re-orientation of the Austrian health sector; • cooperating in national priority areas such as energy efficiency and • increasing support to viable projects of Austrian companies and banks in Central and Eastern Europe.
EIB exposure in Austria is EUR 11.9bn or 3.9% of GDP (EU average exposure is 3.6% of GDP). The EIB signed of EUR 2.45bn in 2013, a 133% increase over 2012, predominantly in the SME/midcap, transport, energy, health and education sectors.
The EIB in Austria
% of total exposure % of GDP
EIB's activity by sector - AustriaExposure, Dec-2013 Signature flow
Source: EIB
0%
20%
40%
60%
80%
100%EU AT
Austria exposure: EUR 13.5bn, 4.3% of GDP
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2006
2007
2008
2009
2010
2011
2012
2013
SMEs & intermediatedOther manufacturingAutom & transp equipRef, Mining, QuarryingAgric, foodServicesHealth,socialEducationTelecommunicationsComposite infrastructureWater, sewageUrban infrastructureUrban,inter modal tr.Other transp.Air transportSea transportRoads, motorwaysRailwaysEnergyEU Average
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In a challenging and varied economic environment, the EIB can particularly add value in CESEE by: • Co-financing with EU funds priority projects and regional/municipal development • Facilitating access to finance for SMEs and corporates • Contributing to ongoing reform and modernisation of the energy network infrastructure, the switch
towards renewable energy resources and fostering energy efficiency • Promoting productivity and competitiveness through R&D initiatives and ICT infrastructure • Advisory services (particularly in transport/ water/wastewater/waste/)
EIB exposure in CESEE is EUR 87.4bn or 7.8% of GDP (EU average exposure is 3.6% of GDP).
The EIB in CESEE (NMS and other Balkans)
EIB's activity by sector EIB's activity by contract counterpart (borrower) for operationsExposure (Dec 2013), % of total Exposure(Dec 2013), % of total
0%
20%
40%
60%
80%
100%EU
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2006
2007
2008
2009
2010
2011
2012
2013
(Fcs
t) 2
014
SMEs & intermediatedOther manufacturingAutom & transp equipRef, Mining, QuarryingAgric, foodServicesHealth,socialEducationTelecommunicationsComposite infrastructureWater, sewageUrban infrastructureUrban,inter modal tr.Other transp.Air transportSea transportRoads, motorwaysRailwaysEnergyEU Average 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EU
Monetary and financialintermediaries
Corporate
Project finance
Sub-sovereign
Sovereign
Not documented
Signature flow, % of GDP
NMS exposure: EUR 87.35 bn, 7.78 % GDP
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Thank you.