Europ eco outlook 2 may 2013 hs_financelab

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Europ eco outlook 2 may 2013 hs_financelab

  1. 1. Slow turnaroundEuropean Economic and Crisis UpdateHolger Sandte, Chief European Analyst2 May 2013
  2. 2. • Financial markets: In central banks we trust (too much)• Euro crisis: where we are and where we – might – go• Euro area recovery: slow, fragile, multi speed• ECB: When the toolbox is almost empty …• Key take aways________________• Annex of tables• Key forecasts2
  3. 3. Equity Markets: Japan!3Financial markets1990 2012 2003 07 2008 1990 2012 end 2012 01/05/2013 2013 low 2013 highS&P 500 8 11 38 12 1,426 1,583 11.0 0.9 11.0Euro STOXX 50 7 13 44 3 2,636 2,712 6.2 1.4 2.9DAX* 10 23 40 14 7,612 7,914 6.1 1.8 4.0Nikkei 3 14 42 5 10,395 13,694 31.7 1.7 31.7MSCI EM (US $) 15 38 54 21 1,055 1,038 4.1 4.1 1.6* Performance Indexcurrent compared toIndexchange p.a. in % change over end2012 in %Source: Nordea Markets and Reuters Ecowin05 06 07 08 09 10 11 12 135010015020050100150200Index1 Jan 2005=100Euro STOXX vs S&P vs NikkeiEuro STOXXNikkei 225S&P 500Index1 Jan 2005=100
  4. 4. EUR govies: spreads narrowing4Financial marketsSource: Nordea Markets and Reuters Ecowin09 10 11 12 13051015200510152010y Government bond yieldsspread vs German Bunds100 bp100 bpFranceItalySpainIrelandPortugal
  5. 5. Commodity prices: reflecting global soft spot5CommoditiesSource: Nordea Markets and Reuters Ecowin07 08 09 10 11 12 132000400060008000100001200030507090110130150USD/tonCopper (rhs)Commodity pricesBrentUSD/barrel
  6. 6. • Euro crisis: where we are and where we – might – go– Why is Europe struggling so hard with the crisis?– The “German view”– Where are we now?– Where do we go from here?– Lessons form Cyprus for the Banking Union6
  7. 7. Why is Europa struggling so hard with the crisis?• It’s a complex crisis: debt (both public & private), economic structures, competitiveness,banks, confidence, politics, institutions• Euro area = designed by poli cians op mal currency area• Euro = currency without a state• Only the ECB can act quickly, 17 European governments cannot• Big differences between countries / governments …– … in economic and monetary policy ideas (”Latin” vs. ”Germanic“ view)– … concerning the causes of the crisis and the right therapy (how much austerity?)– … in the willingness to give up sovereignty / to shift power “to Europe”– … in the vision for Europe: there simply is no (single) vision• Below the European surface, there is still a lot of nationalism, as people’s attitudes areshaped by national historical experience7Euro crisis
  8. 8. Monetary unions now and past8Euro crisisSource: Nordea Markets and Roubini Global EconomicsPolitical UnionFiscal transfersbetweenstatesHard budgetconstraints formember statesCentralizedcontrol of moneysupply by CentralBankFinancial stabilityfunction ofCentral Bank Regime type OutcomeLatin Monetary UnionOrderly dissolution / move to GoldStandard in 1926Scandin. Monetary Union Semi orderly dissolutionGold Standard Disorderly dissolution in the 1930sRuble Zone n/aNationalmonetary unionDisorderly dissolution 1992/93Argentina partial Peg Disorderly dissolution 2001U.S. 1790 1850 Added hard budget constraintsU.S. 1850 1861 Civil WarU.S. 1861/65 1913 yesAdded partial centralization of CBscontrol of MSU.S. 1913 1935 partial noAdded finanical stability functionfor the Fed founded in 1913U.S. post 1935 StableEuropean MonetaryUnionperhapsSui generis17 statesone currencymore integration orbreak upBased on Roubini Global Economics (A How To Manual for an Amicable EZ Divorce)Quasi fixedexchange rateNationalmonetary unionnononot yet yesyesyesnoyesyesyesnonononopartialno
  9. 9. The ”German view”: Do. your. homework.(Note: There is no uniform ”German view” properly speaking. What outside Germany is called“the German view” is probably the position the government and the Bundesbank agree upon):• Crisis was primarily caused by excessive public debt• “Austerity” is an unavoidable part of the solution, not part of the problem. No pain, no gain• Austerity policy must be complemented by growth enhancing structural/supply side reforms• Germany played no role in causing the crisis• For many reasons – economic, financial, political and historical –, Germany is highlyinterested in European integration and in a Euro area that works. Therefore, it contributes tobuying time for crisis countries to do their homework• Any solution that might mean higher inflation in Germany is out of the question9Euro crisis / Germany
  10. 10. … and don’t ask for too many lifebelts10Euro crisis / GermanySource: The Economist
  11. 11. Maastricht world vs. real worldThe Maastricht world• Fiscal self reliance, politicians constrained by rules (stability and growthpact/SGP, 1997) and market pressure• No bail out• Independent central bank, nomonetization of government debt• EMU economies converge economicallyand financially• National policies fully sufficient tocounter any financial imbalances11Euro areaThe real world in 2013Market pressure didn’t work andpoliticians ruined the SGPBail outs for Greece (2010 and 2012),Ireland (2010), Portugal (2011), Spanishbanks (2012), and Cyprus (2013)ECB dancing very close to financeministersLarge economic divergencies betweenEMU countries, financial marketfragmentedFinancial stability seen as a Europeantask Banking Union, but still a longway to go
  12. 12. Euro crisis – where are we now?• Break up: off the table – for now• Firewall: ESM and ECB technically ready to act• Confidence: returned to some degree, but still low• Economy: in recession since, slow and multi speed recovery likely• Rebalancing: still a long way to go; mostly driven by deficit countries• Budget deficits: mostly shrinking at a slow pace• Financial markets declining on the funding side, but still strong on thefragmentation: lending side (interest rates, credit conditions)• Banking Union: moving ahead very slowly• Politics: ongoing debate on how much austerity is needed12Euro crisis
  13. 13. Euro area – where do we go from here?13Euro crisisCloser integration orbreak up?EMU 17 minus GR, CY possibleNorthern EuroMeltdownWhat about EU andinternal market?Huge political andeconomic costsPolitical Union / Banking Union / Fiscal Union(“more Europe”)“Stability union”based on competition,with liability and controlgoing hand in hand,the German view“Transfer/liability union”based on solidarity,the Mediterranean viewBut how exactly? Economic reason may be on Germany’sside. But political conditions and timeare not. The monetary union turns intoa “liability union”. Muddling throughcontinues.Back to Maastricht(national sovereignty, no bailout)
  14. 14. Lessons from Cyprus for the Banking UnionAlthough Cyprus is a very special case, there may be some lessons to draw:• Bail in of a bank’s creditors is possible, tax payers do not have to save every troubled bank• That may soften German resistance to a Banking Union• Crisis underscored the need for a single supervisor not captured by national interests• Common resolution mechanism: The ECB fills a part of that role by providing (or not)emergency liquidity• Needed: A credible – probably not national but European – system of deposit insuranceEuro crisis / Banking Union14Five elements of a European Banking Union• single rulebook for banks – exits to a large extent• single supervisory mechanism – currently discussed by European Parliament• single resolution mechanism – proposal from European Commission later this year• common fiscal backstop – ongoing discussion about bank recapitalisation by ESM• common system for deposit insurance – seems to be off the table for the moment
  15. 15. • Euro area recovery: slow, fragile, multi speed• A look at some Euro area countries– Germany: back to growth from early 2013 on– France: no easy way out of the gloom– Italy in a dead end – any way out?– Spain adapting to the post bubble environment– Cyprus ... and Slovenia next?• ECB: When the toolbox is almost empty …15
  16. 16. A common currency, but very different paths• The “crisis countries” …• … and we left out Greece here16Euro crisis• The more stable countries …• … some of which are also in recessionSource: Nordea Markets and Reuters Ecowin08 09 10 11 12 13859095100105859095100105IndexIndex Real GDP, Q1 2008 = 100CyprusSpainIrelandItalyPortugalSloveniaSource: Nordea Markets and Reuters Ecowin08 09 10 11 12 1390951001059095100105IndexReal GDP, Q1 2008 = 100IndexBelgiumGermanyFinlandFranceNetherlandsAustria
  17. 17. Short term outlook: slow und bumpy recovery• Euro area struggling to get out ofrecession and the outlook is not rosy• Here is why we still expect some growthfrom H2 2013 on:– Monetary policy will remain extremelyloose and the transmission mechanismshould work better over time– Fiscal policy was highly restrictive last yearbut is less so this year and probably next– A weaker euro and healthy growth in theUS and many Emerging Markets shouldprovide tailwind to exports– Structural reforms and efforts to regaincompetitiveness will pay off – although wehave to admit that we don’t know exactlywhen.• GDP forecast (2013/14): 0.4% / 1.4%17Euro areaSource: Nordea Markets and Reuters Ecowin07 08 09 10 11 12 13 14-5-4-3-2-10123-5-4-3-2-10123% q/qGDP growth% q/qGermanyFranceItalySpainSource: Nordea Markets and Reuters Ecowin04 05 06 07 08 09 10 11 12 13 14-12.5-10.0-7.5-5.0-2.50.02.55.07.5-12.5-10.0-7.5-5.0-2.50.02.55.07.5% y/yEuro area GDP% q/q annualised
  18. 18. M1 might be good indicator for the economy• Yes, the recovery is fragile, but all hope isnot lost• M1 = money to spend = currency incirculation plus overnight deposits• If former relationships have notcompletely broken down …• … M1 is compatible with a recovery …• … and also with the idea that equitymarkets have run a bit far, driven byliquidity18Euro area3040506070048121600 02 04 06 08 10 12Source: Nordea Markets and Reuters EcowinP M I Compo-site (rhs)M 1 (3m moving average6 months ahead)% y/y IndexM1 and PMI Composite-60-40-200204060-30369121500 02 04 06 08 10 12Source: Nordea Markets and Reuters EcowinEuro Stoxx 50 (rhs )% y/y% y/yM 1 (3m moving av., 6 months ahead)M1 and the equity market
  19. 19. Which currency is weak?19Euro, US dollarSource: Nordea Markets and Reuters Ecowin00 01 02 03 04 05 06 07 08 09 10 11 12 1380901001101201300.81.01.21.41.61.8IndexExternal value of the euroEUR-USDstronger EURReal effective exchange rateQ1 1999=100 (rhs)Source: Nordea Markets and Reuters Ecowin75 80 85 90 95 00 05 1080901001101201308090100110120130Index IndexReal broad effective USDStronger USDMean +/- std. deviation
  20. 20. Who needs a weaker currency?20Source: Nordea Markets and Reuters Ecowin07 08 09 10 11 12 1375808590951001057580859095100105Index Jan 2008 = 100Manufacturing outputIndex Jan 2008 = 100USAEuro areaEuro area vs. US
  21. 21. FX long term view: USD to strengthen vs. EUR21Source: Nordea Markets and Reuters Ecowin05 06 07 08 09 10 11 12 13 141.101.201.301.401.501.6093959799101103105107 USDForecastEMU real GDP relative toUS real GDPIndex 2005=100EUR/USD, rhsEUR/USDSource: Nordea Markets and Reuters Ecowin10 11 12 13 141.001.101.201.301.401.501.001.101.201.301.401.50USD EUR/USD USDNote: The model is based on the EUR-US 2Y swap ratedifferential (+). R = 0.69Model forecast and95% confidence intervalModel forecastbased on Nordeasswap rate forecastActual
  22. 22. Why Germany is coping relatively well at the moment• Export based growth model works as longas Emerging Markets and US are growing• No public or private debt excesses tocorrect• Fiscal policy has leeway not to getrestrictive now (and may be not later,either)• Low ECB policy rates passed through tocompanies and consumers (monetarytransmission mechanism works)• Stable labour market; new jobs arecreated at low growth, but productivitystagnates• GDP forecast (2013/14): 0.7% / 2.1%22GermanySource: Nordea Markets and Reuters Ecowin00 01 02 03 04 05 06 07 08 09 10 11 12 13234563839404142Mio. personsUnemployed, rhsEmployedLabour marketMio. persons-40-2002040-20-100102000 02 04 06 08 10 12ExportsCapex spendingIfo export expec-tations (rhs)% y/y IndexSource: Nordea Markets and Reuters Ecowin
  23. 23. Short term outlook: back to growth in early 2013• After a 0.6% drop in GDP in Q4, surveydata point towards a rebound in Q1• Capex spending (down five quarters in arow) likely to have stabilised• Improvement in Southern Europe willtranslate into German exports (as well ascapex sprending and employment)• Main risks:– Deepening of the crisis in southern Europe– France sliding into a deep recession• Long term challenges– Low trend growth– Unfavorable demography– (Parts of the) banking sector23GermanySource: Nordea Markets and Reuters Ecowin00 01 02 03 04 05 06 07 08 09 10 11 12 13 14-2-10128090100110120% q/qForecastGDP and IFOIndex 2005=100IFO,businessexpectationsGDP (rhs)Source: Nordea Markets and Reuters Ecowin07 08 09 10 11 12 137080901001101201301401501607080901001101201301401501602010=100Euro areaTotalEx-Euro areaExport orders2010=100
  24. 24. A house price bubble in Germany? Well …24Source: Nordea Markets, OECD and Reuters Ecowin96 98 00 02 04 06 08 10 125010015020025030035050100150200250300350Index1995=100GermanyDenmarkReal home pricesIndex1995=100NorwaySwedenSource: Nordea Markets, OECD and Reuters Ecowin90 92 94 96 98 00 02 04 06 08 10 1250751001251501755075100125150175IndexIndex Home price-income ratioNote: 100 = long term averageDenmarkSwedenNorwayGermanyGermany
  25. 25. What Germans are (not) talking about… talking about:• Euro crisis:”Money can’t buy you friends”• Tax fraud• Fair pay, working poor• ”Energiewende”• German dominance (in theChampions League)25… not (a lot) talking about:• Be happy• Germany gains from the eurocrisis (low interest rate, weakereuro, immigration)• Does it make much sense to runhuge export and current accountsurpluses?• General election in SeptemberGermany
  26. 26. Thoughts on the German election (22 September)• Angela Merkel is popular, no strong mood for change• But: Being popular doesn’t assure re election of CDU/FDP government• A new party to watch: ”Alternative für Deutschland“ (anti euro)• CDU/FDP in pole position; grand coalition and SPD/Green Party coalitionpossible• Where could an SPD led government make a difference?– Economic policy (taxes, social security) less business friendly– Management of the euro crisis ”more Europe”, less austerity– Safe heaven status of Bunds don’t worry too much26Germany
  27. 27. If there were elections next Sunday …27GermanySource: http://www.wahlrecht.de/umfragen/index.htm
  28. 28. The Economist on Italy and France28Italy, France
  29. 29. No easy way out of the gloom• Nasty mix of cyclical and structuralproblems• Low share of manufacturing in gross valueadded (only 10% compared to 16.8% inSweden or 23% in Germany• Low profit margins in the industrial sector,concentrated on low/medium valueadded products, …• … leading to a high price elasticity ofexport and frequent calls for weaker euro• Severe loss of global market shares• Public debt issues, rating worries• Large public sector but low efficiency ofgovernment activity (eg in education)• Expect no growth for 201329FranceSource: Nordea Markets and Reuters Ecowin00 01 02 03 04 05 06 07 08 09 10 11 12 13 14-6-4-20246406080100120140% y/yGDP and business climateIndexGDP, rhsINSEEbusinessclimateSource: Nordea Markets and Reuters Ecowin99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 145060708090100-8-7-6-5-4-3-2-101 % of GDPNote: EuropeanCommission forecastGeneralgovernment debt, rhsPublic finances% of GDPGeneralgovernmentbudget balance
  30. 30. Italy: new government faces old problems• Six consecutive quarters of decliningGDP…• … which is now as high (or low) as it wasin 2001• Italian voters clearly rejected austerity inlate February …• … and it took two months to form a new(grand coalition) government• GDP to decline by another 1¼% this year,with not much growth in 2014 either30ItalySource: Nordea Markets and Reuters EcoWin04 05 06 07 08 09 10 11 12 13-90-80-70-60-50-40-30-20-1001020-90-80-70-60-50-40-30-20-1001020BalancePortugalGreeceConsumer sentimentSpainBalanceItalyGermanySource: Nordea Markets and Reuters Ecowin05 06 07 08 09 10 11 12 13-10.0-7.5-5.0-2.50.02.55.07.5-10.0-7.5-5.0-2.50.02.55.07.5EURbnIrelandItalyTrade balanceGreeceEURbnPortugalSpainNote: primitive seasonal adjustment
  31. 31. Spain adapting to the post bubble environment• Typical case of a protracted ”balance sheetrecession”:• Credit boom assets prices then thebubble bursts private sector deleveragessavings consumption, investmentasset prices bad loans publicdeficits• Government debt rose from 36% of GDP in2007 to 84% in 2012• Public sector deficit still 10.6% in 2012(mainly structural)• As monetary policy doesn’t work, eitherfiscal policy should give stimuli (if it can), orrecovery has to come from exports vianominal or real deprecation31Spain
  32. 32. Spain: housing correction going on, exports brighter• Downsizing of the housing sector began in2008 – and it’s not over yet• Construction investment down 45% since2008 (GDP:only 7%)• House prices increased by 145% from2000 to 2007 and declined by only 17%since• Employment down 19% overall and 62%in the oversized construction sector …• … and it hasn’t bottomed out yet• Exports the brighter spot, both goods andservices• GDP forecast (2013/14): 1.5% / 0.9%32Spain
  33. 33. Slovenia – vulnerable but very different from Cyprus• Banks are struggling with the second recession since 2009 and sinking house prices• Bad loans: € 7 bn according to IMF, 20% of GDP• Economy is likely to shrink by around 2% this year. So, no short term relief from this side• Slovenia may need external help but it is very different from Cyprus:– Small banking sector, less need for bank recapitalization (far below 10% of GDP)– State as majority owner of the banking system has a strong interest in taking part incapital increase– Public debt only 53.7% of GDP (2012). Cyprus: 86.5%– Economic structure much healthier than in Cyprus. Industry accounts for 30% of grossvalue addedConclusion:• Should investors worry about Slovenia and follow events closely? Yes• Will Slovenia be the next Cyprus? No• As long as crisis management doesn’t get it completely wrong, it is more likely to be a, well,“normal” case of crisis – and that would be bad enough33
  34. 34. 0.750.500.250.000.250.500.753540455055606599 01 03 05 07 09 11 13Source: Nordea Markets and Reuters EcowinPMI compositeoutputIndex bpPMI and ECB policy changesChange in ECBmain refi rate (rhs)ECB “ready to act” but running out of options• The latest rate cut will not change the economic outlook much …• … and it will not ease fragmentation in bank lendingMonetary policy is increasingly ”pushing on a string”34ECB
  35. 35. Source: Nordea Markets and Reuters Ecowin03 04 05 06 07 08 09 10 11 123.54.04.55.05.56.06.57.03.54.04.55.05.56.06.57.0 %Medium term interest rates on small loans%GermanySpainFranceNetherlandsItalyFixing the monetary transmission mechanism – but how?• Further measures to support lending to SMEs are likely, e.g.:– further/cheaper liquidity to banks that lend more to SMEs– softer rules on SME loans as collateral• Don’t expect too much positive effect35ECB
  36. 36. Key take aways36• Anyone who claims that he knows exactly what will happen with the euro crisis(and when) does not tell you the truth• Slow and bumpy growth ahead for the Euro area• Wide differences between Euro area economies and bond yields to persist• ECB effective in avoiding disaster but with no silver bullet to kick start the economy• Full Banking Union will not arrive quickly• If growth does not return by 2014 at the latest, political capital risks gettingexhausted which would make a Euro area break up possible• Euro weaker vs. the dollar over time• Return of capital (not on capital) likely to stay on investors’ mindsSummary
  37. 37. • Annex of tables• Key forecasts37
  38. 38. Global Macro forecasts38Annex tablesSource: Nordea Markets and Reuters Ecowin
  39. 39. European macro forecasts39Annex tablesSource: Nordea Markets and Reuters EcowinEuro Area: Macroeconomic indicators (% annual real changes unless otherwise noted)2009 (EURbn) 2010 2011 2012 2013E 2014EPrivate consumption 5,134 0.9 0.1 -1.2 -0.5 0.8Government consumption 1,988 0.7 -0.1 -0.1 0.0 0.5Fixed investments 1,731 -0.3 1.6 -3.9 -1.0 5.7Exports 3,285 11.0 6.5 2.9 2.5 7.3Imports 3,167 9.5 4.3 -0.9 2.0 8.0Net exports* 118 0.7 0.9 1.6 0.2 -0.1GDP 2.0 1.5 -0.5 -0.4 1.4Nominal GDP, EUR bn 8,920 9,176 9,421 9,483 9,578 9,770Unemployment rate, % 10.1 10.2 11.4 11.7 11.4Consumer prices, % y/y 1.6 2.7 2.5 1.6 1.6Current account, % of GDP 0.3 0.2 1.5 2.2 2.3General government budget balance, % of GDP -6.2 -4.1 -3.6 -2.8 -2.7General government gross debt, % of GDP 85.6 88.1 93.1 95.1 95.2
  40. 40. European macro forecasts40Annex tablesGermany: Macroeconomic indicators (% annual real changes unless otherwise noted)2009 (EURbn) 2010 2011 2012 2013E 2014EPrivate consumption 1,391.6 0.8 1.7 0.6 0.5 1.0Government consumption and investment 475.3 1.7 1.0 1.4 1.3 1.0Fixed investment 408.7 5.6 6.4 -1.9 3.2 6.7Exports 1,006.5 13.4 7.9 4.3 2.4 6.0Imports 889.6 10.9 7.5 2.2 3.6 6.7Net exports* 116.9 1.6 0.6 1.2 -0.4 0.2GDP 4.0 3.1 0.9 0.7 2.1Nominal GDP (EURbn) 2,374.5 2,496.2 2,592.6 2,643.9 2,696.8 2,764.2Unemployment rate, % 7.7 7.1 6.8 6.8 6.5Consumer prices, % y/y 1.2 2.5 2.1 1.5 1.7Current account, % of GDP 6.1 5.6 6.3 6.0 5.6General government budget balance, % of GDP -4.1 -0.8 0.2 -0.5 0.2Gross public debt, % of GDP 82.5 80.5 81.6 80.7 78.3Source: Nordea Markets and Reuters Ecowin
  41. 41. European macro forecasts41Annex tablesSource: Nordea Markets and Reuters EcowinFrance: Macroeconomic indicators (% annual real changes unless otherwise noted)2009 (EURbn) 2010 2011 2012 2013E 2014EPrivate consumption 1,029 1.5 0.3 0.0 0.0 0.8Government consumption and investment 436 1.7 0.2 1.4 1.0 0.5Fixed investment 330 1.0 3.5 0.0 -0.7 2.4Exports 427 9.2 5.5 2.3 1.0 4.3Imports 469 8.4 5.2 -0.3 0.5 4.0Net exports* -42 0.0 0.0 0.7 0.2 0.1GDP 1.6 1.7 0.0 0.0 1.2Nominal GDP (EURbn) 1,886 1,936 1,995 2,028 2,048 2,089Unemployment rate, % 9.7 9.6 10.3 10.7 10.3Consumer prices, % y/y 1.7 2.3 2.2 1.6 1.7Current account, % of GDP -2.0 -2.6 -1.9 -1.6 -1.8General government budget balance, % of GDP -7.1 -5.2 -4.6 -3.8 -4.1Gross public debt, % of GDP 82.3 86.0 90.3 93.4 95.0
  42. 42. FX forecasts42Annex tablesSource: Nordea Markets and Reuters Ecowin
  43. 43. Rates forecasts43Annex tablesSource: Nordea Markets and Reuters Ecowin
  44. 44. The Euro area compared to USA, Japan, China44Annex tablesSource: Nordea Markets and Reuters EcowinEuro area USA Japan ChinaPopulation 2011 m 331.9 311.6 126.2 1,347.4Nominal GDP 2011 bn € 9,425.3 10,842.1 4,233.9 5,247.6in % of Eurozone GDP 2011 % 100.0 115.0 44.9 55.7Nominal GDP per capita 2011 €1,000 28.4 34.8 33.6 3.9in % of GDP Eurozone per capita 2011 % 100.0 122.5 118.2 13.7Nominal GDP per capita (PPP) 2011 €1,000 24.3 34.8 25.0 6.0in % of GDP Eurozone per capita 2011 % 100.0 143.2 102.8 24.8Share in World GDP (nominal) 2011 % 18.7 21.6 8.4 10.5Share in World GDP (PPP) 2011 % 14.2 19.1 5.6 14.3Share in the real GDPPrivate consumption 2011 % 56.4 70.9 59.1 35.4Gross fixed capital formation 2011 % 19.0 12.8 19.5 44.8Public comsumption 2011 % 21.4 19.0 19.6 12.8Net exports 2011 % 0.1 3.1 2.6 5.6Shares in gross value addedAgriculture 2011 % 1.7 * 1,2 * 1,2 10.1Industry (including construction industry) 2011 % 25.5 * 20,0 * 28,1 46.8Services 2011 % 72.8 * 78,8 * 70,7 43.1Real GDP 2007 to 2011 % y/y, p.a. 0.5 0.5 0.1 10.7Consumer prices 2008 to 2011 % y/y, p.a. 2.0 2.2 0.2 3.7Unemployment rate 2009 to 2011 % 9.0 7.7 4.5 4.1Government budget balance 2011 % of GDP 4.1 10.1 9.8 1.2Government debt 2011 % of GDP 88.0 102.9 229.6 25.8Current account balance 2011 % of GDP 0.2 3.1 2.1 2.8Share of global exports 2011 % 13.6 8.3 4.6 10.7Share of global imports 2011 % 13.3 12.4 4.6 9.5* Data for 2010
  45. 45. GDP: Total, per capita and composition45Annex tablesSource: Nordea Markets and Reuters EcowinNominalGDPShare inEurozoneGDPPopulation1,000 € PPP1)Agriculture Industry ServicesPrivateconsumptionPublicconsumptionGross fixedcapitalformationExport Importbn € % mGermany 2,593 27.5 81.8 31.7 111 1.0 30.1 68.9 55.5 19.0 17.8 50.2 43.8France 1,995 21.2 65.1 30.7 99 1.8 18.7 79.5 56.8 24.7 19.2 27.3 29.7Italy 1,580 16.8 60.6 26.1 94 2.0 24.6 73.4 57.8 21.0 18.7 28.5 28.3Spain 1,063 11.3 46.0 23.0 92 2.6 28.3 69.1 59.4 22.6 28.3 34.8 36.2Netherlands 602 6.4 16.6 36.1 121 1.8 24.8 73.4 46.0 27.0 17.9 79.8 70.4Belgium 370 3.9 11.0 33.6 109 0.6 22.9 76.5 50.5 24.0 20.4 82.8 80.6Austria 301 3.2 8.4 35.8 119 1.6 29.8 68.6 52.2 18.1 21.2 59.4 54.2Greece 209 2.2 11.3 18.4 76 3.1 18.0 78.9 72.1 18.8 13.1 22.0 29.1Finland 189 2.0 5.4 35.2 107 2.9 27.8 69.3 50.2 19.4 19.3 47.6 42.4Portugal 171 1.8 10.6 16.2 71 2.1 23.3 74.6 65.5 20.4 18.8 39.2 44.1Ireland 159 1.7 4.5 34.8 118 1.7 31.3 67.0 50.5 15.8 10.3 104.5 80.6Slovakia 69 0.7 5.4 12.8 68 3.2 41.9 54.9 54.3 16.7 24.0 91.7 84.9Luxembourg 43 0.5 0.5 0.1 254 33.8 17.2 22.9 182.0 160.1Slovenia 36 0.4 2.1 17.6 78 2.5 29.7 67.8 52.6 19.0 19.2 77.7 75.1Cyprus 18 0.2 0.8 21.2 85 2.4 17.1 80.5 68.3 19.7 17.4 45.5 50.4Estonia 16 0.2 1.3 11.9 62 3.6 30.2 66.2 57.9 18.2 24.7 95.2 89.5Malta 6 0.1 0.4 15.7 77 1.8 18.1 80.1 64.5 19.6 13.4 100.1 96.0Eurozone 9,421 100.0 332.0 28.4 100 1.7 25.5 72.8 55.8 21.3 18.9 42.9 40.61) Euro area = 100%GDP per capita Shares in gross value added Shares in the real GDPindex %
  46. 46. Government budget balance, % of GDP46Source: Nordea Markets, Reuters Ecowin, IMFAnnex tables1999 2003 2004 2005 2006 2007average2003/072008 2009 2010 2011 2012average2008/122013 2014Germany 1.6 4.2 3.8 3.3 1.7 0.2 2.5 0.1 3.1 4.1 0.8 0.2 1.6 0.2 0.0France 1.8 4.1 3.6 3.0 2.4 2.8 3.2 3.3 7.6 7.1 5.2 4.6 5.6 3.8 4.1Italy 2.0 3.6 3.6 4.5 3.4 1.6 3.3 2.7 5.4 4.3 3.8 2.8 3.8 2.0 1.9Spain 1.2 0.4 0.1 1.3 2.4 1.9 1.0 4.5 11.2 9.7 9.4 10.2 9.0 6.7 7.2Netherlands 0.4 3.2 1.8 0.3 0.5 0.2 0.9 0.5 5.6 5.0 4.4 4.0 3.7 3.5 3.5Belgium 0.7 0.2 0.2 2.6 0.3 0.1 0.6 1.1 5.6 3.8 3.7 3.9 3.6 3.1 3.4Austria 2.4 1.7 4.6 1.8 1.7 1.0 2.1 1.0 4.1 4.5 2.5 3.0 3.0 2.5 1.8Greece 3.1 5.7 7.4 5.6 6.0 6.8 6.3 9.9 15.6 10.8 9.5 10.3 11.2 8.5 7.3Finland 1.7 2.5 2.3 2.7 4.1 5.3 3.4 4.3 2.7 2.8 1.1 1.9 0.8 1.7 1.4Portugal 3.1 3.7 4.0 6.5 4.6 3.2 4.4 3.7 10.2 9.8 4.4 5.0 6.6 4.9 2.9Ireland 2.5 0.4 1.4 1.7 2.9 0.1 1.3 7.4 13.9 30.9 13.3 7.7 14.6 7.3 4.2Slovakia 7.4 2.8 2.4 2.8 3.2 1.8 2.6 2.1 8.0 7.7 4.9 4.8 5.5 3.3 3.4Luxembourg 3.4 0.5 1.1 0.0 1.4 3.7 0.9 3.2 0.8 0.8 0.3 1.5 0.1 0.9 1.3Slovenia 3.0 2.7 2.3 1.5 1.4 0.0 1.6 1.9 6.0 5.7 6.4 4.4 4.9 5.1 4.7Cyprus 4.3 6.6 4.1 2.4 1.2 3.5 2.2 0.9 6.1 5.3 6.3 5.5 4.5 4.5 3.8Estonia 3.5 1.7 1.6 1.6 2.5 2.4 2.0 2.9 2.0 0.2 1.2 0.5 0.8 0.3 0.2Malta 6.9 9.0 4.6 2.9 2.7 2.3 4.3 4.5 3.8 3.6 2.7 2.6 3.4 2.9 2.5Euro area 1.5 3.2 2.9 2.5 1.4 0.7 2.1 2.1 6.3 6.2 4.2 3.7 4.5 2.8 2.7USA #N/A 4.9 4.4 3.2 2.0 2.7 3.5 6.7 13.3 11.2 10.1 8.7 10.0 7.3 5.6UK 0.9 3.4 3.5 3.4 2.7 2.8 3.2 5.0 11.4 10.2 7.8 6.3 8.1 7.4 6.0Japan 7.8 7.8 5.9 4.8 3.7 2.1 4.9 4.1 10.4 9.4 9.8 10.0 8.7 9.1 7.2
  47. 47. Government debt, % of GDP47Source: Nordea Markets, Reuters Ecowin, IMF1999 2003 2004 2005 2006 2007average2003/072008 2009 2010 2011 2012average2008/122013E 2014EGermany 61.3 64.4 66.2 68.5 68.0 65.2 66.5 66.8 74.5 82.5 80.4 81.9 77.2 80.7 78.3France 58.9 63.2 65.0 66.7 64.0 64.2 64.6 68.2 79.2 82.3 86.0 90.3 81.2 93.4 95.0Italy 113.0 103.9 103.4 105.7 106.3 103.3 104.5 106.1 116.4 119.2 120.7 127.1 117.9 128.1 127.1Spain 62.4 48.8 46.3 43.2 39.7 36.3 42.8 40.2 53.9 61.5 69.3 88.4 62.6 95.8 101.0Netherlands 61.1 52.0 52.4 51.8 47.4 45.3 49.8 58.5 60.8 63.1 65.5 70.8 63.7 73.8 75.0Belgium 113.6 98.4 94.0 92.0 88.0 84.0 91.3 89.2 95.7 95.5 97.8 99.8 95.6 100.8 101.1Austria 66.8 65.3 64.7 64.2 62.3 60.2 63.3 63.8 69.2 72.0 72.4 74.3 70.3 75.2 74.5Greece 94.0 97.4 98.9 101.2 107.5 107.2 102.4 112.9 129.7 148.3 170.6 161.6 144.6 175.6 175.2Finland 45.7 44.5 44.4 41.7 39.6 35.2 41.1 33.9 43.5 48.6 49.0 53.4 45.7 56.4 57.6Portugal 51.4 59.4 61.9 67.7 69.4 68.4 65.4 71.7 83.2 93.5 108.0 120.6 95.4 123.9 124.7Ireland 47.0 30.7 29.5 27.3 24.6 25.0 27.4 44.5 64.9 92.2 106.4 117.2 85.0 122.2 120.1Slovakia 47.8 42.4 41.5 34.2 30.5 29.6 35.6 27.9 35.6 41.0 43.3 52.4 40.0 55.1 57.1Luxembourg 6.4 6.1 6.3 6.1 6.7 6.7 6.4 14.4 15.3 19.2 18.3 20.5 17.6 22.2 24.1Slovenia 24.1 27.2 27.3 26.7 26.4 23.1 26.2 22.0 35.0 38.6 46.9 53.7 39.2 59.5 63.4Cyprus 59.3 69.7 70.9 69.4 64.7 58.8 66.7 48.9 58.5 61.3 71.1 86.5 65.3 93.1 97.0Estonia 6.5 5.6 5.0 4.6 4.4 3.7 4.7 4.5 7.2 6.7 6.1 10.5 7.0 11.8 11.3Malta 55.2 66.0 69.8 68.0 62.5 60.7 65.4 60.9 66.3 67.4 70.4 73.1 67.6 73.8 73.6Euro area 71.6 69.2 69.6 70.3 68.7 66.4 68.9 70.2 80.0 85.6 88.1 93.1 83.4 95.1 95.2USA 60.8 60.4 68.3 67.9 66.6 67.2 66.1 76.1 89.7 98.6 102.9 107.2 94.9 111.7 113.8UK 43.6 39.1 41.0 42.2 43.3 44.2 42.0 52.3 67.8 79.4 85.2 89.8 74.9 95.4 97.9Japan 131.9 169.6 180.7 186.4 186.0 183.0 181.1 191.8 210.2 215.3 229.6 236.6 216.7 245.0 246.2Annex tables
  48. 48. Global Competitiveness Index Ranking (2012/2013)48Annex tablesSource: Nordea Markets and World Economic Forum1.Institutions2. Infrastructure3. Macroeconomicenvironment4. Healthand primaryeducation5. Highereducationand training6. Goodsmarketefficiency7. Labormarketefficiency8. Financialmarketdevelopment9. Technologicalreadiness10. Marketsize11. Businesssophistication12.InnovationSwitzerland 1 5 5 8 8 3 7 1 9 6 39 2 1Germany 6 16 3 30 22 5 21 53 32 15 5 3 7France 21 32 4 68 21 27 46 66 27 14 8 21 17Italy 42 97 28 102 25 45 65 127 111 40 10 28 36Spain 36 48 10 104 36 29 55 108 82 26 14 32 35Netherlands 5 7 7 41 5 6 6 17 20 9 20 4 9Belgium 17 27 21 66 2 4 15 50 31 22 27 12 11Austria 16 25 15 33 20 18 22 32 34 17 36 6 13Greece 96 111 43 144 41 43 108 133 132 43 46 85 87Finland 3 3 23 24 1 1 18 15 4 10 54 7 2Portugal 49 46 24 116 30 30 61 123 99 28 48 54 31Ireland 27 19 25 131 12 20 9 16 108 12 56 18 21Slovakia 71 104 56 54 42 54 54 86 47 45 59 61 89Luxembourg 22 9 12 12 28 44 4 37 12 2 92 23 18Slovenia 56 58 35 50 24 23 49 91 128 34 78 53 32Cyprus 58 40 39 117 9 32 33 44 38 37 106 52 53Estonia 34 30 41 20 27 25 31 10 39 25 96 51 30Malta 47 37 34 71 19 35 34 92 15 21 125 43 48USA 7 41 14 111 34 8 23 6 16 11 1 10 6UK 8 13 6 110 17 16 17 5 13 7 6 8 10Japan 10 22 11 124 10 21 20 20 36 16 4 1 51 = best conditions; 144 = worst conditions below 144 surveyed countries of the World Economic ForumOverallRankingBasis requirements Efficiency enhancersInnovation andsophistication factors
  49. 49. Ease of Doing Business Index (2013)49Annex tablesSource: Nordea Markets and World BankStarting abusinessDealing withconstructionpermitsGettingelectricityRegisteringpropertyGettingcreditProtectinginvestorsPayingtaxesTradingacrossbordersEnforcingcontractsResolvinginsolvencyGermany 20 (19) 106 14 2 81 23 100 72 13 5 19France 34 (29) 27 52 42 146 53 82 53 27 8 43Italy 73 (87) 84 103 107 39 104 49 131 55 160 31Spain 44 (44) 136 38 70 57 53 100 34 39 64 20Netherlands 31 (31) 67 89 67 49 53 117 29 12 32 6Belgium 33 (28) 44 57 82 176 70 19 75 29 18 7Austria 29 (32) 134 75 24 34 23 100 77 26 7 12Greece 78 (100) 146 31 59 150 83 117 56 62 87 50Finland 11 (11) 49 34 21 24 40 70 23 6 9 5Portugal 30 (30) 31 78 35 30 104 49 77 17 22 23Ireland 15 (10) 10 106 95 53 12 6 6 28 63 9Slovakia 46 (48) 83 46 100 8 23 117 100 98 69 38Luxembourg 56 (50) 93 33 63 134 159 128 14 32 1 52Slovenia 35 (37) 30 61 31 83 104 17 63 57 56 42Cyprus 36 (40) 37 80 98 99 53 32 31 18 108 25Estonia 21 (24) 47 35 53 14 40 70 50 7 31 72Malta 102 ( ) 150 167 111 80 176 70 27 34 121 67USA 4 (4) 13 17 19 25 4 6 69 22 6 16UK 7 (7) 19 20 62 73 1 10 16 14 21 8Japan 24 (20) 114 72 27 64 23 19 127 19 35 11 = best conditions; 185 = worst conditions among 185 countries surveyed by the World BankReform improves conditions for doing businessReform worsens conditions for doing businessOverallRanking 2013(2012)c a t e g o r i e s
  50. 50. Thank you!Dr. Holger SandteChief European AnalystGlobal Research+45 3333 1191holger.sandte@nordea.comNordea Markets is the name of the Markets departments of Nordea BankNorge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and NordeaBank Danmark A/S.The information provided herein is intended for background informationonly and for the sole use of the intended recipient. The views and otherinformation provided herein are the current views of Nordea Markets as ofthe date of this document and are subject to change without notice. Thisnotice is not an exhaustive description of the described product or the risksrelated to it, and it should not be relied on as such, nor is it a substitute forthe judgement of the recipient.The information provided herein is not intended to constitute and does notconstitute investment advice nor is the information intended as an offer orsolicitation for the purchase or sale of any financial instrument. Theinformation contained herein has no regard to the specific investmentobjectives, the financial situation or particular needs of any particularrecipient. Relevant and specific professional advice should always beobtained before making any investment or credit decision. It is important tonote that past performance is not indicative of future results.Nordea Markets is not and does not purport to be an adviser as to legal,taxation, accounting or regulatory matters in any jurisdiction.This document may not be reproduced, distributed or published for anypurpose without the prior written consent from Nordea Markets.50

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