SlideShare a Scribd company logo
1 of 3
Download to read offline
The Global Economy
Monthly letter from Swedbank’s Economic Research Department
by Cecilia Hermansson                                                                                                     No. 6 • 22 September 2011




  A weaker economic outlook makes it even more important
       to use the right tools from a shrinking toolbox
        Renewed economic pessimism and increased debt worries are jeopardising
         financial and political stability, especially in Europe and the US. Although the risk
         of a new recession has increased, it still is not part of our main scenario.

        Trying to create inflation or raising tariffs are not the right measures to address the
         crisis, although such ideas are being suggested and in some cases implemented.
         What are needed instead are more, and more extensive, structural reforms, and
         for countries that are able, additional stimulus.


Gloominess dominates                                                 When it comes to the debt crisis drama, the
                                                                     financial market flares up every time the troika of
The downturn in global stock markets during the
                                                                     the ECB, EU Commission and IMF starts looking at
summer months primarily relates to two
                                                                     the Greek support program to see if reforms are
phenomena: renewed economic pessimism and
                                                                     being implemented. Since the Greek economy is
growing debt concerns.
                                                                     developing weaker than expected and the
Despite exaggerated claims and possibly some                         government has been slow to execute reforms,
overly negative analyses, the hard economic data                     lenders are hesitating whether to approve the next
indicate that a slowdown has already begun after                     payment, this time of 8 billion euro.
the positive rebound in growth following the
                                                                     Make note that sentiment about Ireland is much
financial crisis. These data include purchasing
                                                                     more positive and its programme is progressing as
managers indexes, which have dropped down to a
                                                                     planned, which is evident in the differential between
reading of 50 in a number of countries, along with
                                                                     German and Irish government bonds, which has
declining exports, weaker labour and housing
                                                                     declined recently, in contrast with the corresponding
markets, and consumption data from the US and
                                                                     German-Greek bonds.
Europe. Moreover, GDP growth had already slowed
during the second quarter in the US and Germany.                                          Interest rate differential against the German 10-year
                                                                                                  government bond, percentage points
              Export trends, index 100 = 2000m01
                                                                                         22,5
 340
 320                                                                                     20,0
            Global
 300
            USA                                                                          17,5
 280
 260        Japan                                                                        15,0
                                                                     Percentage points




 240        Euro Zone
 220                                                                                     12,5
            Emerging Markets
 200
            Asia                                                                         10,0
 180                                                                                                                        Greece
 160                                                                                      7,5
 140
 120                                                                                      5,0                           Ireland
                                                                                                           Spain
 100                                                                                                                      Portugal
  80                                                                                      2,5              Italy
                                                                                          0,0
                                                                                                                   UK      France Belgium   Sweden
                                                                                         -2,5
                                                                                                 07          08            09         10              11
                                                                                                                                            Source: Reuters EcoWin




                               Ekonomiska sekretariatet, Swedbank AB (publ), 105 34 Stockholm, tfn 08-5859 1000
                   E-mail: ek.sekr@swedbank.se www.swedbank.se Ansvarig utgivare: Cecilia Hermansson, 08-5859 7720.
                                      Magnus Alvesson, 08-5859 3341, Jörgen Kennemar, 08-5859 7730
The Global Economy

                               Monthly newsletter from Swedbank’s Economic Research Department, continued

                                                      No. 6 • 22 September 2011



Comments by euro politicians that Greece may                                                consumption had held up better than confidence
have to drop out of the currency union are doing                                            surveys suggest. This is especially true of retail
little to help the parties involved. Statements by the                                      sales, which have surprised on the upside. In other
Greek government that euro politicians are using                                            words, there is a gap between what households say
Greece as an experiment certainly don’t help,                                               they will do and what they actually do, although
either, but can be seen as part of the negotiations                                         there is still a possibility that confidence, which is a
now under way between lenders and borrowers.                                                leading indicator, is signalling significantly weaker
                                                                                            consumption going forward.
If forecasters go by what has happened and try to
average out the negative and positive events, their                                         Considering the gloominess hanging over the US
future projections naturally will also be negative.                                         economy, our GDP forecasts this year and next are
                                                                                            probably too high at around 2%. Even if the US
The problem is that this isn’t especially constructive,
since these events, if anything, are binary in the                                          avoids a new recession, it will be hard to create the
sense that they can either happen (e.g., the euro                                           growth needed to reach 2%, especially when the
                                                                                            labour market, 45 months after employment
collapses) or not.
                                                                                            peaked, still has a long way back and open
It makes more sense to build scenarios on                                                   unemployment exceeds 9%.
assumptions how the debt crises in the US, Japan
and especially Europe will be handled going
forward. If it is assumed that they can in fact be                                          Toolbox: Neither higher inflation nor
handled – even at the last minute – the global                                              protectionism will resolve the crisis
economy should be able to avoid a new recession.                                            When the financial crisis and global recession
If the crisis cannot be managed, if political and                                           occurred in 2008, the world's politicians and central
financial instability grows at the same time that                                           bank governors worked together to try to fight the
future confidence declines even further among                                               negative effects. Rate cuts, quantitative easing,
investors, companies and households, there is a                                             banking support and fiscal stimulus were among the
risk of another recession, and this time it will be                                         tools they used.
harder to fight off, and therefore more protracted,                                         At this point interest rates are already as low as
since the toolbox at our disposal no longer has as                                          they can be in the US, the UK and Japan, and
many effective tools.                                                                       relatively low in the euro zone. The time for fiscal
                                                                                            stimulus has passed for the euro countries in crisis,
                US consumer confidence (index) and
               private consumption (annual % change)                                        but could still work in the US and Germany, if the
        140                                                           7
                                                                                            political will can be mustered.
        130                                                           6                     When the toolbox shrinks, people get nervous,
                                                                                            considering that the challenges haven’t gotten any
        120                                                           5
                                                                                            smaller. For growth countries, and even some
        110                                                           4                     developed countries such as Switzerland, there is a
        100                                                           3                     risk that their currencies could rise enough to hurt
                                                                                            them competitively. For Switzerland, this led to the
                                                                          Percent




        90                                                            2
Index




                                                                                            dramatic decision to set a limit on the franc versus
        80                                                            1                     the euro, which is now being defended with the help
        70                                                            0                     of stronger confidence and the printing presses.
        60                                                           -1                     For Brazil, it is more a question of capital controls,
                                                                                            but recently of higher customs duties on auto
        50                                                           -2
                                                                                            imports as well. There is a risk that other countries
        40                                                           -3                     will be a little less hesitant to resort to protectionist
        30                                                           -4                     measures such as higher tariffs when others have
              80   85     90       95     00     05      10                                 already done so, which makes it unfortunate that
                                                       Source: Reuters EcoWin               Brazil has chosen this route.
                                                                                            Among developed and highly indebted countries,
At the same time it is hard to make projections right
                                                                                            there have been suggestions that higher inflation
now based on confidence indicators. For example,
                                                                                            could stimulate demand and reduce the debt
US households and businesses were extremely
                                                                                            burden in real terms. Professor Kenneth Rogoff
worried this past summer when negotiations on the
                                                                                            recently said that it was time to “think outside the
US debt ceiling spooked the markets and S&P
                                                                                            box”, i.e., that we should no longer be afraid of
downgraded the US’s credit rating. Still, household
                                                                                            slightly higher inflation of 4-6% a year.



                                                                                    2 (3)
The Global Economy

                         Monthly newsletter from Swedbank’s Economic Research Department, continued

                                                No. 6 • 22 September 2011



The problem is that you can’t always decide what                                 Structural budget deficit as a share
                                                                                       of GDP 2009 and 2012
inflation is going to be. For one thing, it could be
                                                                       4
considerably higher, since the previous anchors
have already been dropped. For another, it can be                      2

harder to pinpoint inflation when the job market is                    0

weak and so many people are out of work. It’s wage                     ‐2
inflation, if anything, that could have a positive                     ‐4
effect, rather than inflation from higher commodity                    ‐6
prices.                                                                                                                            2009
                                                                       ‐8
Furthermore, it is likely that higher inflation would                 ‐10
                                                                                                                                   2012


be followed by higher nominal interest rates, which
                                                                      ‐12
reduces the positive impact of such a measure. Nor
                                                                      ‐14
would the effect on the debt burden be so positive.
The IMF has calculated that if inflation is 5%                        ‐16

annually for five years, the total debt burden would
shrink by 8-9%. So inflation would probably have to
be in the double digits to have much of an impact
on debt.                                                             Some of the structural reforms require spending,
Questions of income inequality also have to be                       while others are possible anyway. More efficient
considered. Wouldn't it be better to raise taxes on                  government is largely a question of changing
those with relatively high incomes than to raise                     attitudes. Southern Europe has no other alternative
inflation, which usually hits those with low incomes                 than to try to improve growth by implementing
the hardest.                                                         reforms that make it more competitive, e.g. in
                                                                     education, labour markets, pensions, infrastructure
                                                                     including IT, and public/tax administration.
Toolbox (cont.): Structural reforms are vital                        The time when countries could devaluate their own
It makes more sense to focus on structural reforms                   currencies has passed, as has the time when the
and more expansive fiscal policy if possible.                        interest differentials relative to Germany were
Monetary policy is less effective at this juncture,                  minimal and pricing was inaccurate. If the currency
since many households and businesses are less                        union is to survive, member-countries have to adopt
interested in borrowing when they are busy trying to                 more effective economic policies, fiscal coordination
clean up their balance sheets.                                       has to improve, a single bank regulator has to be
                                                                     created, and the ECB, as a central bank, has to
Structural reforms are the most important measure
                                                                     eliminate uncertainty about its role as lender of last
for the PIIGS countries, which have lost competitive
                                                                     resort. Then the currency union would work better,
ground in recent years due to their high cost levels
                                                                     even in a crisis. This will take time, but the sooner
and often wasteful administration of public
                                                                     the road is staked out, the better.
resources. Politicians in Greece, Italy, Spain and
Portugal have to convince citizens that it is worth                                                         Cecilia Hermansson
their while to pay taxes, that the money will be used
effectively and that certain (often wealthy) groups
won’t receive unfair tax breaks and exemptions.

Swedbanks Ekonomiska sekretariat
105 34 Stockholm                        Swedbanks Månadsbrev om den Globala Ekonomin ges ut som en service till våra kunder.
tfn 08-5859 7740                        Vi tror oss ha använt tillforlitliga källor and bearbetningsrutiner vid utarbetandet av
ek.sekr@swedbank.se                     analyser, som redovisas in publikationen. Vi kan dock inte garantera analysernas riktighet
www.swedbank.se                         or fullständighet and kan inte ansvara for eventuell felaktighet or brist in grundmaterialet or
                                        bearbetningen därav. Läsarna uppmanas att basera eventuella (investerings-)beslut även
Ansvarig utgivare                       på annat underlag. Varken Swedbank or dess anställda or andra medarbetare skall kunna
Cecilia Hermansson, 08-5859 7720.       göras ansvariga for forlust or skada, direkt or indirekt, på grund av eventuella fel or brister
Magnus Alvesson, 08-5859 3341           som redovisas in Swedbanks Månadsbrev.
Jörgen Kennemar, 08-5859 7730




                                                             3 (3)

More Related Content

What's hot

Impact of 2008 crisis on mobile operators in Nordic-Baltic region_presentation
Impact of 2008 crisis on mobile operators in Nordic-Baltic region_presentationImpact of 2008 crisis on mobile operators in Nordic-Baltic region_presentation
Impact of 2008 crisis on mobile operators in Nordic-Baltic region_presentationOlga Efremenko
 
MeadWestvaco Credit Suisse Conference
MeadWestvaco Credit Suisse ConferenceMeadWestvaco Credit Suisse Conference
MeadWestvaco Credit Suisse ConferenceCompany Spotlight
 
ETX Capital -From The Floor is a daily briefing and global market report to k...
ETX Capital -From The Floor is a daily briefing and global market report to k...ETX Capital -From The Floor is a daily briefing and global market report to k...
ETX Capital -From The Floor is a daily briefing and global market report to k...ETX_Capital
 
Global Economic Outlook - August 2012
Global Economic Outlook - August 2012Global Economic Outlook - August 2012
Global Economic Outlook - August 2012Swedbank
 
From the floor 16 november11
From the floor 16 november11From the floor 16 november11
From the floor 16 november11ETX_Capital
 
Andrew Sentence: The "New Normal" for the global economy
Andrew Sentence: The "New Normal" for the global economyAndrew Sentence: The "New Normal" for the global economy
Andrew Sentence: The "New Normal" for the global economyNuffield Trust
 
From thefloor 27september11
From thefloor 27september11From thefloor 27september11
From thefloor 27september11ETX_Capital
 
From the Floor 10october11
From the Floor 10october11From the Floor 10october11
From the Floor 10october11ETX_Capital
 
Economic update – Keith Wade’s presentation at the LBS Investing Strategy event
Economic update – Keith Wade’s presentation at the LBS Investing Strategy event Economic update – Keith Wade’s presentation at the LBS Investing Strategy event
Economic update – Keith Wade’s presentation at the LBS Investing Strategy event London Business School
 
Newsletter Semanal "Markets Perspectives" Fincor 10-09
Newsletter Semanal "Markets Perspectives" Fincor 10-09Newsletter Semanal "Markets Perspectives" Fincor 10-09
Newsletter Semanal "Markets Perspectives" Fincor 10-09João Pinto
 
The Lithuanian Economy, No.2, 9 March/2011
The Lithuanian Economy, No.2, 9 March/2011The Lithuanian Economy, No.2, 9 March/2011
The Lithuanian Economy, No.2, 9 March/2011Swedbank
 
From the Floor 09 November 11
From the Floor 09 November 11From the Floor 09 November 11
From the Floor 09 November 11ETX_Capital
 
Pw c size of_emerging_economies-march_2006
Pw c size of_emerging_economies-march_2006Pw c size of_emerging_economies-march_2006
Pw c size of_emerging_economies-march_2006punit22
 
Weekly markets perspectives august 27
Weekly markets perspectives august 27Weekly markets perspectives august 27
Weekly markets perspectives august 27fincorCorretora
 
From The Floor 20 October 11
From The Floor 20 October 11From The Floor 20 October 11
From The Floor 20 October 11ETX_Capital
 
From the Floor 15 November 11
From the Floor 15 November 11From the Floor 15 November 11
From the Floor 15 November 11ETX_Capital
 
Banco santander activity and results 2010
Banco santander activity and results 2010Banco santander activity and results 2010
Banco santander activity and results 2010BANCO SANTANDER
 
Global Business Solutions (GBS) by Dennis R. Chrisbaum
Global Business Solutions (GBS) by Dennis R. ChrisbaumGlobal Business Solutions (GBS) by Dennis R. Chrisbaum
Global Business Solutions (GBS) by Dennis R. ChrisbaumBronwen Elizabeth Madden
 
ETX Capital -From The Floor is a daily briefing and global market report to k...
ETX Capital -From The Floor is a daily briefing and global market report to k...ETX Capital -From The Floor is a daily briefing and global market report to k...
ETX Capital -From The Floor is a daily briefing and global market report to k...ETX_Capital
 
SANTANDER CONSUMER FINANCE-SANTANDER INVESTOR DAY 2011
SANTANDER CONSUMER FINANCE-SANTANDER INVESTOR DAY 2011SANTANDER CONSUMER FINANCE-SANTANDER INVESTOR DAY 2011
SANTANDER CONSUMER FINANCE-SANTANDER INVESTOR DAY 2011BANCO SANTANDER
 

What's hot (20)

Impact of 2008 crisis on mobile operators in Nordic-Baltic region_presentation
Impact of 2008 crisis on mobile operators in Nordic-Baltic region_presentationImpact of 2008 crisis on mobile operators in Nordic-Baltic region_presentation
Impact of 2008 crisis on mobile operators in Nordic-Baltic region_presentation
 
MeadWestvaco Credit Suisse Conference
MeadWestvaco Credit Suisse ConferenceMeadWestvaco Credit Suisse Conference
MeadWestvaco Credit Suisse Conference
 
ETX Capital -From The Floor is a daily briefing and global market report to k...
ETX Capital -From The Floor is a daily briefing and global market report to k...ETX Capital -From The Floor is a daily briefing and global market report to k...
ETX Capital -From The Floor is a daily briefing and global market report to k...
 
Global Economic Outlook - August 2012
Global Economic Outlook - August 2012Global Economic Outlook - August 2012
Global Economic Outlook - August 2012
 
From the floor 16 november11
From the floor 16 november11From the floor 16 november11
From the floor 16 november11
 
Andrew Sentence: The "New Normal" for the global economy
Andrew Sentence: The "New Normal" for the global economyAndrew Sentence: The "New Normal" for the global economy
Andrew Sentence: The "New Normal" for the global economy
 
From thefloor 27september11
From thefloor 27september11From thefloor 27september11
From thefloor 27september11
 
From the Floor 10october11
From the Floor 10october11From the Floor 10october11
From the Floor 10october11
 
Economic update – Keith Wade’s presentation at the LBS Investing Strategy event
Economic update – Keith Wade’s presentation at the LBS Investing Strategy event Economic update – Keith Wade’s presentation at the LBS Investing Strategy event
Economic update – Keith Wade’s presentation at the LBS Investing Strategy event
 
Newsletter Semanal "Markets Perspectives" Fincor 10-09
Newsletter Semanal "Markets Perspectives" Fincor 10-09Newsletter Semanal "Markets Perspectives" Fincor 10-09
Newsletter Semanal "Markets Perspectives" Fincor 10-09
 
The Lithuanian Economy, No.2, 9 March/2011
The Lithuanian Economy, No.2, 9 March/2011The Lithuanian Economy, No.2, 9 March/2011
The Lithuanian Economy, No.2, 9 March/2011
 
From the Floor 09 November 11
From the Floor 09 November 11From the Floor 09 November 11
From the Floor 09 November 11
 
Pw c size of_emerging_economies-march_2006
Pw c size of_emerging_economies-march_2006Pw c size of_emerging_economies-march_2006
Pw c size of_emerging_economies-march_2006
 
Weekly markets perspectives august 27
Weekly markets perspectives august 27Weekly markets perspectives august 27
Weekly markets perspectives august 27
 
From The Floor 20 October 11
From The Floor 20 October 11From The Floor 20 October 11
From The Floor 20 October 11
 
From the Floor 15 November 11
From the Floor 15 November 11From the Floor 15 November 11
From the Floor 15 November 11
 
Banco santander activity and results 2010
Banco santander activity and results 2010Banco santander activity and results 2010
Banco santander activity and results 2010
 
Global Business Solutions (GBS) by Dennis R. Chrisbaum
Global Business Solutions (GBS) by Dennis R. ChrisbaumGlobal Business Solutions (GBS) by Dennis R. Chrisbaum
Global Business Solutions (GBS) by Dennis R. Chrisbaum
 
ETX Capital -From The Floor is a daily briefing and global market report to k...
ETX Capital -From The Floor is a daily briefing and global market report to k...ETX Capital -From The Floor is a daily briefing and global market report to k...
ETX Capital -From The Floor is a daily briefing and global market report to k...
 
SANTANDER CONSUMER FINANCE-SANTANDER INVESTOR DAY 2011
SANTANDER CONSUMER FINANCE-SANTANDER INVESTOR DAY 2011SANTANDER CONSUMER FINANCE-SANTANDER INVESTOR DAY 2011
SANTANDER CONSUMER FINANCE-SANTANDER INVESTOR DAY 2011
 

Viewers also liked

Swedbank Corporate presentation Q4 2010
Swedbank Corporate presentation Q4 2010Swedbank Corporate presentation Q4 2010
Swedbank Corporate presentation Q4 2010Swedbank
 
Purchasing Managers' Index Report July 2009
Purchasing Managers' Index Report July 2009Purchasing Managers' Index Report July 2009
Purchasing Managers' Index Report July 2009Swedbank
 
To the Point, November 26 2009
To the Point, November 26 2009To the Point, November 26 2009
To the Point, November 26 2009Swedbank
 
To the Point, 2010 January
To the Point, 2010 JanuaryTo the Point, 2010 January
To the Point, 2010 JanuarySwedbank
 
To the Point, 2010 March
To the Point, 2010 MarchTo the Point, 2010 March
To the Point, 2010 MarchSwedbank
 
Swedbank företagspresentation, september, 2010
Swedbank företagspresentation, september, 2010Swedbank företagspresentation, september, 2010
Swedbank företagspresentation, september, 2010Swedbank
 
Swedbank företagspresentation, mars 2010
Swedbank företagspresentation, mars 2010Swedbank företagspresentation, mars 2010
Swedbank företagspresentation, mars 2010Swedbank
 
Purchasing Managers Index - May 1 2013
Purchasing Managers Index - May 1 2013Purchasing Managers Index - May 1 2013
Purchasing Managers Index - May 1 2013Swedbank
 

Viewers also liked (8)

Swedbank Corporate presentation Q4 2010
Swedbank Corporate presentation Q4 2010Swedbank Corporate presentation Q4 2010
Swedbank Corporate presentation Q4 2010
 
Purchasing Managers' Index Report July 2009
Purchasing Managers' Index Report July 2009Purchasing Managers' Index Report July 2009
Purchasing Managers' Index Report July 2009
 
To the Point, November 26 2009
To the Point, November 26 2009To the Point, November 26 2009
To the Point, November 26 2009
 
To the Point, 2010 January
To the Point, 2010 JanuaryTo the Point, 2010 January
To the Point, 2010 January
 
To the Point, 2010 March
To the Point, 2010 MarchTo the Point, 2010 March
To the Point, 2010 March
 
Swedbank företagspresentation, september, 2010
Swedbank företagspresentation, september, 2010Swedbank företagspresentation, september, 2010
Swedbank företagspresentation, september, 2010
 
Swedbank företagspresentation, mars 2010
Swedbank företagspresentation, mars 2010Swedbank företagspresentation, mars 2010
Swedbank företagspresentation, mars 2010
 
Purchasing Managers Index - May 1 2013
Purchasing Managers Index - May 1 2013Purchasing Managers Index - May 1 2013
Purchasing Managers Index - May 1 2013
 

Similar to The Global Economy No. 6 - September 22, 2011

Swedbank's Global Economic Outlook, August 2011
Swedbank's Global Economic Outlook, August 2011Swedbank's Global Economic Outlook, August 2011
Swedbank's Global Economic Outlook, August 2011Swedbank
 
Investor spring 2012
Investor spring 2012Investor spring 2012
Investor spring 2012KateOD
 
The Global Economy No. 8 - November 30, 2011
The Global Economy No. 8 -  November 30, 2011The Global Economy No. 8 -  November 30, 2011
The Global Economy No. 8 - November 30, 2011Swedbank
 
K bank capital market perspectives jul 22 greece
K bank capital market perspectives jul 22   greeceK bank capital market perspectives jul 22   greece
K bank capital market perspectives jul 22 greeceKBank Fx Dealing Room
 
Risk Management - The Role of Financial Institutions in the Current Economic ...
Risk Management - The Role of Financial Institutions in the Current Economic ...Risk Management - The Role of Financial Institutions in the Current Economic ...
Risk Management - The Role of Financial Institutions in the Current Economic ...FERMA
 
Eagle star zurich weekly investment news 20th september 2010
Eagle star zurich weekly investment news 20th september 2010Eagle star zurich weekly investment news 20th september 2010
Eagle star zurich weekly investment news 20th september 2010Omega Financial Management
 
Presentazione Ny
Presentazione NyPresentazione Ny
Presentazione Nycrispoli
 
2012 global powers of retailing deloitte
2012 global powers of retailing deloitte2012 global powers of retailing deloitte
2012 global powers of retailing deloittemymarketingnet
 
2009. Jürgen Pfister. The global and European environment for CEE economies. ...
2009. Jürgen Pfister. The global and European environment for CEE economies. ...2009. Jürgen Pfister. The global and European environment for CEE economies. ...
2009. Jürgen Pfister. The global and European environment for CEE economies. ...Forum Velden
 
Global Strategy Powerpoint For Na Trip
Global Strategy Powerpoint For Na TripGlobal Strategy Powerpoint For Na Trip
Global Strategy Powerpoint For Na TripJustin Patrie
 
The Global Economy No. 5 - June 23, 2011
The Global Economy No. 5 - June 23, 2011The Global Economy No. 5 - June 23, 2011
The Global Economy No. 5 - June 23, 2011Swedbank
 
Weekly markets perspectives september 10
Weekly markets perspectives september 10Weekly markets perspectives september 10
Weekly markets perspectives september 10Fincor Corretora
 
Nordic Outlook November 2010
Nordic Outlook November 2010Nordic Outlook November 2010
Nordic Outlook November 2010The Benche
 
The Global Economy No. 9 - December 20, 2011
The Global Economy No. 9 -  December 20, 2011The Global Economy No. 9 -  December 20, 2011
The Global Economy No. 9 - December 20, 2011Swedbank
 
Atadius Market Monitor - Sept
Atadius Market Monitor - SeptAtadius Market Monitor - Sept
Atadius Market Monitor - Septjspeltz
 
J Mcd Greek Referendum 110111 Final
J Mcd Greek Referendum 110111 FinalJ Mcd Greek Referendum 110111 Final
J Mcd Greek Referendum 110111 Finalkurtdk
 
Economic and Structural Report August 2008, extract from
Economic and Structural Report August 2008, extract fromEconomic and Structural Report August 2008, extract from
Economic and Structural Report August 2008, extract fromSwedbank
 
Swedbank's Global Economic Outlook, 2011 March
Swedbank's Global Economic Outlook, 2011 MarchSwedbank's Global Economic Outlook, 2011 March
Swedbank's Global Economic Outlook, 2011 MarchSwedbank
 

Similar to The Global Economy No. 6 - September 22, 2011 (20)

Swedbank's Global Economic Outlook, August 2011
Swedbank's Global Economic Outlook, August 2011Swedbank's Global Economic Outlook, August 2011
Swedbank's Global Economic Outlook, August 2011
 
Investor spring 2012
Investor spring 2012Investor spring 2012
Investor spring 2012
 
The Global Economy No. 8 - November 30, 2011
The Global Economy No. 8 -  November 30, 2011The Global Economy No. 8 -  November 30, 2011
The Global Economy No. 8 - November 30, 2011
 
K bank capital market perspectives jul 22 greece
K bank capital market perspectives jul 22   greeceK bank capital market perspectives jul 22   greece
K bank capital market perspectives jul 22 greece
 
Risk Management - The Role of Financial Institutions in the Current Economic ...
Risk Management - The Role of Financial Institutions in the Current Economic ...Risk Management - The Role of Financial Institutions in the Current Economic ...
Risk Management - The Role of Financial Institutions in the Current Economic ...
 
To The Rescue 2410
To The Rescue 2410To The Rescue 2410
To The Rescue 2410
 
Eagle star zurich weekly investment news 20th september 2010
Eagle star zurich weekly investment news 20th september 2010Eagle star zurich weekly investment news 20th september 2010
Eagle star zurich weekly investment news 20th september 2010
 
Presentazione Ny
Presentazione NyPresentazione Ny
Presentazione Ny
 
2012 global powers of retailing deloitte
2012 global powers of retailing deloitte2012 global powers of retailing deloitte
2012 global powers of retailing deloitte
 
2009. Jürgen Pfister. The global and European environment for CEE economies. ...
2009. Jürgen Pfister. The global and European environment for CEE economies. ...2009. Jürgen Pfister. The global and European environment for CEE economies. ...
2009. Jürgen Pfister. The global and European environment for CEE economies. ...
 
E U R Ooc 26811
E  U  R  Ooc  26811E  U  R  Ooc  26811
E U R Ooc 26811
 
Global Strategy Powerpoint For Na Trip
Global Strategy Powerpoint For Na TripGlobal Strategy Powerpoint For Na Trip
Global Strategy Powerpoint For Na Trip
 
The Global Economy No. 5 - June 23, 2011
The Global Economy No. 5 - June 23, 2011The Global Economy No. 5 - June 23, 2011
The Global Economy No. 5 - June 23, 2011
 
Weekly markets perspectives september 10
Weekly markets perspectives september 10Weekly markets perspectives september 10
Weekly markets perspectives september 10
 
Nordic Outlook November 2010
Nordic Outlook November 2010Nordic Outlook November 2010
Nordic Outlook November 2010
 
The Global Economy No. 9 - December 20, 2011
The Global Economy No. 9 -  December 20, 2011The Global Economy No. 9 -  December 20, 2011
The Global Economy No. 9 - December 20, 2011
 
Atadius Market Monitor - Sept
Atadius Market Monitor - SeptAtadius Market Monitor - Sept
Atadius Market Monitor - Sept
 
J Mcd Greek Referendum 110111 Final
J Mcd Greek Referendum 110111 FinalJ Mcd Greek Referendum 110111 Final
J Mcd Greek Referendum 110111 Final
 
Economic and Structural Report August 2008, extract from
Economic and Structural Report August 2008, extract fromEconomic and Structural Report August 2008, extract from
Economic and Structural Report August 2008, extract from
 
Swedbank's Global Economic Outlook, 2011 March
Swedbank's Global Economic Outlook, 2011 MarchSwedbank's Global Economic Outlook, 2011 March
Swedbank's Global Economic Outlook, 2011 March
 

More from Swedbank

Swedbank corporate presentation April 25 2017
Swedbank corporate presentation April 25 2017Swedbank corporate presentation April 25 2017
Swedbank corporate presentation April 25 2017Swedbank
 
Swedbank foretagspresentation 25 april 2017
Swedbank foretagspresentation 25 april 2017Swedbank foretagspresentation 25 april 2017
Swedbank foretagspresentation 25 april 2017Swedbank
 
Delårsrapport kv1 2017
Delårsrapport kv1 2017Delårsrapport kv1 2017
Delårsrapport kv1 2017Swedbank
 
Interim report q1 2017
Interim report q1 2017Interim report q1 2017
Interim report q1 2017Swedbank
 
Year end report 2016
Year end report 2016Year end report 2016
Year end report 2016Swedbank
 
Bokslutskommuniké 2016
Bokslutskommuniké 2016Bokslutskommuniké 2016
Bokslutskommuniké 2016Swedbank
 
Swedbank företagspresentation, 2 februari 2017
Swedbank företagspresentation, 2 februari 2017Swedbank företagspresentation, 2 februari 2017
Swedbank företagspresentation, 2 februari 2017Swedbank
 
Swedbank corporate presentation, February 2 2017
Swedbank corporate presentation, February 2 2017Swedbank corporate presentation, February 2 2017
Swedbank corporate presentation, February 2 2017Swedbank
 
Swedbank Corporate Presentation, October 25 2016
Swedbank Corporate Presentation, October 25 2016Swedbank Corporate Presentation, October 25 2016
Swedbank Corporate Presentation, October 25 2016Swedbank
 
Swedbank företagspresentation, 25 oktober 2016
Swedbank företagspresentation, 25 oktober 2016Swedbank företagspresentation, 25 oktober 2016
Swedbank företagspresentation, 25 oktober 2016Swedbank
 
Swedbank Corporate Presentation, June 30 2016
Swedbank Corporate Presentation, June 30 2016Swedbank Corporate Presentation, June 30 2016
Swedbank Corporate Presentation, June 30 2016Swedbank
 
Swedbank företagspresentation, 30 juni 2016
Swedbank företagspresentation, 30 juni 2016Swedbank företagspresentation, 30 juni 2016
Swedbank företagspresentation, 30 juni 2016Swedbank
 
Swedbank corporate presentation Q1, 2016
Swedbank corporate presentation Q1, 2016Swedbank corporate presentation Q1, 2016
Swedbank corporate presentation Q1, 2016Swedbank
 
Swedbank företagspresentation kvartal 1, 2016.
Swedbank företagspresentation kvartal 1, 2016.Swedbank företagspresentation kvartal 1, 2016.
Swedbank företagspresentation kvartal 1, 2016.Swedbank
 
Swedbank corporate presentation Q4, 2015
Swedbank corporate presentation Q4, 2015Swedbank corporate presentation Q4, 2015
Swedbank corporate presentation Q4, 2015Swedbank
 
Swedbank företagspresentation kvartal 4,2015
Swedbank företagspresentation kvartal 4,2015Swedbank företagspresentation kvartal 4,2015
Swedbank företagspresentation kvartal 4,2015Swedbank
 
Year end report 2015
Year end report 2015Year end report 2015
Year end report 2015Swedbank
 
Bokslutskommuniké 2015
Bokslutskommuniké 2015Bokslutskommuniké 2015
Bokslutskommuniké 2015Swedbank
 
Swedbank Företagspresentation, September 2015
Swedbank Företagspresentation, September 2015Swedbank Företagspresentation, September 2015
Swedbank Företagspresentation, September 2015Swedbank
 
Swedbank Corporate Presentation, September 2015
Swedbank Corporate Presentation, September 2015Swedbank Corporate Presentation, September 2015
Swedbank Corporate Presentation, September 2015Swedbank
 

More from Swedbank (20)

Swedbank corporate presentation April 25 2017
Swedbank corporate presentation April 25 2017Swedbank corporate presentation April 25 2017
Swedbank corporate presentation April 25 2017
 
Swedbank foretagspresentation 25 april 2017
Swedbank foretagspresentation 25 april 2017Swedbank foretagspresentation 25 april 2017
Swedbank foretagspresentation 25 april 2017
 
Delårsrapport kv1 2017
Delårsrapport kv1 2017Delårsrapport kv1 2017
Delårsrapport kv1 2017
 
Interim report q1 2017
Interim report q1 2017Interim report q1 2017
Interim report q1 2017
 
Year end report 2016
Year end report 2016Year end report 2016
Year end report 2016
 
Bokslutskommuniké 2016
Bokslutskommuniké 2016Bokslutskommuniké 2016
Bokslutskommuniké 2016
 
Swedbank företagspresentation, 2 februari 2017
Swedbank företagspresentation, 2 februari 2017Swedbank företagspresentation, 2 februari 2017
Swedbank företagspresentation, 2 februari 2017
 
Swedbank corporate presentation, February 2 2017
Swedbank corporate presentation, February 2 2017Swedbank corporate presentation, February 2 2017
Swedbank corporate presentation, February 2 2017
 
Swedbank Corporate Presentation, October 25 2016
Swedbank Corporate Presentation, October 25 2016Swedbank Corporate Presentation, October 25 2016
Swedbank Corporate Presentation, October 25 2016
 
Swedbank företagspresentation, 25 oktober 2016
Swedbank företagspresentation, 25 oktober 2016Swedbank företagspresentation, 25 oktober 2016
Swedbank företagspresentation, 25 oktober 2016
 
Swedbank Corporate Presentation, June 30 2016
Swedbank Corporate Presentation, June 30 2016Swedbank Corporate Presentation, June 30 2016
Swedbank Corporate Presentation, June 30 2016
 
Swedbank företagspresentation, 30 juni 2016
Swedbank företagspresentation, 30 juni 2016Swedbank företagspresentation, 30 juni 2016
Swedbank företagspresentation, 30 juni 2016
 
Swedbank corporate presentation Q1, 2016
Swedbank corporate presentation Q1, 2016Swedbank corporate presentation Q1, 2016
Swedbank corporate presentation Q1, 2016
 
Swedbank företagspresentation kvartal 1, 2016.
Swedbank företagspresentation kvartal 1, 2016.Swedbank företagspresentation kvartal 1, 2016.
Swedbank företagspresentation kvartal 1, 2016.
 
Swedbank corporate presentation Q4, 2015
Swedbank corporate presentation Q4, 2015Swedbank corporate presentation Q4, 2015
Swedbank corporate presentation Q4, 2015
 
Swedbank företagspresentation kvartal 4,2015
Swedbank företagspresentation kvartal 4,2015Swedbank företagspresentation kvartal 4,2015
Swedbank företagspresentation kvartal 4,2015
 
Year end report 2015
Year end report 2015Year end report 2015
Year end report 2015
 
Bokslutskommuniké 2015
Bokslutskommuniké 2015Bokslutskommuniké 2015
Bokslutskommuniké 2015
 
Swedbank Företagspresentation, September 2015
Swedbank Företagspresentation, September 2015Swedbank Företagspresentation, September 2015
Swedbank Företagspresentation, September 2015
 
Swedbank Corporate Presentation, September 2015
Swedbank Corporate Presentation, September 2015Swedbank Corporate Presentation, September 2015
Swedbank Corporate Presentation, September 2015
 

Recently uploaded

Buy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxBuy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxPrecize Formely Leadoff
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707harshan90
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingHenry Tapper
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023SkillCircle
 
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.KumarJayaraman3
 
20240315 _E-Invoicing Digiteal. .pptx
20240315 _E-Invoicing Digiteal.    .pptx20240315 _E-Invoicing Digiteal.    .pptx
20240315 _E-Invoicing Digiteal. .pptxFinTech Belgium
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESKumarJayaraman3
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent PreferencesGRAPE
 
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxSlideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxOffice for National Statistics
 
The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...Antonis Zairis
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoCoinGecko
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismBrian Lin
 
Stock Market Brief Deck for 3/22/2024.pdf
Stock Market Brief Deck for 3/22/2024.pdfStock Market Brief Deck for 3/22/2024.pdf
Stock Market Brief Deck for 3/22/2024.pdfMichael Silva
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfMichael Silva
 
MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.Arifa Saeed
 
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Matthews Bantsijang
 
What Key Factors Should Risk Officers Consider When Using Generative AI
What Key Factors Should Risk Officers Consider When Using Generative AIWhat Key Factors Should Risk Officers Consider When Using Generative AI
What Key Factors Should Risk Officers Consider When Using Generative AI360factors
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdfAdnet Communications
 

Recently uploaded (20)

Buy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxBuy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptx
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB funding
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023
 
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
 
20240315 _E-Invoicing Digiteal. .pptx
20240315 _E-Invoicing Digiteal.    .pptx20240315 _E-Invoicing Digiteal.    .pptx
20240315 _E-Invoicing Digiteal. .pptx
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent Preferences
 
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxSlideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
 
The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
 
Stock Market Brief Deck for 3/22/2024.pdf
Stock Market Brief Deck for 3/22/2024.pdfStock Market Brief Deck for 3/22/2024.pdf
Stock Market Brief Deck for 3/22/2024.pdf
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdf
 
MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.
 
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
 
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
 
Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024
 
What Key Factors Should Risk Officers Consider When Using Generative AI
What Key Factors Should Risk Officers Consider When Using Generative AIWhat Key Factors Should Risk Officers Consider When Using Generative AI
What Key Factors Should Risk Officers Consider When Using Generative AI
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
 

The Global Economy No. 6 - September 22, 2011

  • 1. The Global Economy Monthly letter from Swedbank’s Economic Research Department by Cecilia Hermansson No. 6 • 22 September 2011 A weaker economic outlook makes it even more important to use the right tools from a shrinking toolbox  Renewed economic pessimism and increased debt worries are jeopardising financial and political stability, especially in Europe and the US. Although the risk of a new recession has increased, it still is not part of our main scenario.  Trying to create inflation or raising tariffs are not the right measures to address the crisis, although such ideas are being suggested and in some cases implemented. What are needed instead are more, and more extensive, structural reforms, and for countries that are able, additional stimulus. Gloominess dominates When it comes to the debt crisis drama, the financial market flares up every time the troika of The downturn in global stock markets during the the ECB, EU Commission and IMF starts looking at summer months primarily relates to two the Greek support program to see if reforms are phenomena: renewed economic pessimism and being implemented. Since the Greek economy is growing debt concerns. developing weaker than expected and the Despite exaggerated claims and possibly some government has been slow to execute reforms, overly negative analyses, the hard economic data lenders are hesitating whether to approve the next indicate that a slowdown has already begun after payment, this time of 8 billion euro. the positive rebound in growth following the Make note that sentiment about Ireland is much financial crisis. These data include purchasing more positive and its programme is progressing as managers indexes, which have dropped down to a planned, which is evident in the differential between reading of 50 in a number of countries, along with German and Irish government bonds, which has declining exports, weaker labour and housing declined recently, in contrast with the corresponding markets, and consumption data from the US and German-Greek bonds. Europe. Moreover, GDP growth had already slowed during the second quarter in the US and Germany. Interest rate differential against the German 10-year government bond, percentage points Export trends, index 100 = 2000m01 22,5 340 320 20,0 Global 300 USA 17,5 280 260 Japan 15,0 Percentage points 240 Euro Zone 220 12,5 Emerging Markets 200 Asia 10,0 180 Greece 160 7,5 140 120 5,0 Ireland Spain 100 Portugal 80 2,5 Italy 0,0 UK France Belgium Sweden -2,5 07 08 09 10 11 Source: Reuters EcoWin Ekonomiska sekretariatet, Swedbank AB (publ), 105 34 Stockholm, tfn 08-5859 1000 E-mail: ek.sekr@swedbank.se www.swedbank.se Ansvarig utgivare: Cecilia Hermansson, 08-5859 7720. Magnus Alvesson, 08-5859 3341, Jörgen Kennemar, 08-5859 7730
  • 2. The Global Economy Monthly newsletter from Swedbank’s Economic Research Department, continued No. 6 • 22 September 2011 Comments by euro politicians that Greece may consumption had held up better than confidence have to drop out of the currency union are doing surveys suggest. This is especially true of retail little to help the parties involved. Statements by the sales, which have surprised on the upside. In other Greek government that euro politicians are using words, there is a gap between what households say Greece as an experiment certainly don’t help, they will do and what they actually do, although either, but can be seen as part of the negotiations there is still a possibility that confidence, which is a now under way between lenders and borrowers. leading indicator, is signalling significantly weaker consumption going forward. If forecasters go by what has happened and try to average out the negative and positive events, their Considering the gloominess hanging over the US future projections naturally will also be negative. economy, our GDP forecasts this year and next are probably too high at around 2%. Even if the US The problem is that this isn’t especially constructive, since these events, if anything, are binary in the avoids a new recession, it will be hard to create the sense that they can either happen (e.g., the euro growth needed to reach 2%, especially when the labour market, 45 months after employment collapses) or not. peaked, still has a long way back and open It makes more sense to build scenarios on unemployment exceeds 9%. assumptions how the debt crises in the US, Japan and especially Europe will be handled going forward. If it is assumed that they can in fact be Toolbox: Neither higher inflation nor handled – even at the last minute – the global protectionism will resolve the crisis economy should be able to avoid a new recession. When the financial crisis and global recession If the crisis cannot be managed, if political and occurred in 2008, the world's politicians and central financial instability grows at the same time that bank governors worked together to try to fight the future confidence declines even further among negative effects. Rate cuts, quantitative easing, investors, companies and households, there is a banking support and fiscal stimulus were among the risk of another recession, and this time it will be tools they used. harder to fight off, and therefore more protracted, At this point interest rates are already as low as since the toolbox at our disposal no longer has as they can be in the US, the UK and Japan, and many effective tools. relatively low in the euro zone. The time for fiscal stimulus has passed for the euro countries in crisis, US consumer confidence (index) and private consumption (annual % change) but could still work in the US and Germany, if the 140 7 political will can be mustered. 130 6 When the toolbox shrinks, people get nervous, considering that the challenges haven’t gotten any 120 5 smaller. For growth countries, and even some 110 4 developed countries such as Switzerland, there is a 100 3 risk that their currencies could rise enough to hurt them competitively. For Switzerland, this led to the Percent 90 2 Index dramatic decision to set a limit on the franc versus 80 1 the euro, which is now being defended with the help 70 0 of stronger confidence and the printing presses. 60 -1 For Brazil, it is more a question of capital controls, but recently of higher customs duties on auto 50 -2 imports as well. There is a risk that other countries 40 -3 will be a little less hesitant to resort to protectionist 30 -4 measures such as higher tariffs when others have 80 85 90 95 00 05 10 already done so, which makes it unfortunate that Source: Reuters EcoWin Brazil has chosen this route. Among developed and highly indebted countries, At the same time it is hard to make projections right there have been suggestions that higher inflation now based on confidence indicators. For example, could stimulate demand and reduce the debt US households and businesses were extremely burden in real terms. Professor Kenneth Rogoff worried this past summer when negotiations on the recently said that it was time to “think outside the US debt ceiling spooked the markets and S&P box”, i.e., that we should no longer be afraid of downgraded the US’s credit rating. Still, household slightly higher inflation of 4-6% a year. 2 (3)
  • 3. The Global Economy Monthly newsletter from Swedbank’s Economic Research Department, continued No. 6 • 22 September 2011 The problem is that you can’t always decide what Structural budget deficit as a share of GDP 2009 and 2012 inflation is going to be. For one thing, it could be 4 considerably higher, since the previous anchors have already been dropped. For another, it can be 2 harder to pinpoint inflation when the job market is 0 weak and so many people are out of work. It’s wage ‐2 inflation, if anything, that could have a positive ‐4 effect, rather than inflation from higher commodity ‐6 prices. 2009 ‐8 Furthermore, it is likely that higher inflation would ‐10 2012 be followed by higher nominal interest rates, which ‐12 reduces the positive impact of such a measure. Nor ‐14 would the effect on the debt burden be so positive. The IMF has calculated that if inflation is 5% ‐16 annually for five years, the total debt burden would shrink by 8-9%. So inflation would probably have to be in the double digits to have much of an impact on debt. Some of the structural reforms require spending, Questions of income inequality also have to be while others are possible anyway. More efficient considered. Wouldn't it be better to raise taxes on government is largely a question of changing those with relatively high incomes than to raise attitudes. Southern Europe has no other alternative inflation, which usually hits those with low incomes than to try to improve growth by implementing the hardest. reforms that make it more competitive, e.g. in education, labour markets, pensions, infrastructure including IT, and public/tax administration. Toolbox (cont.): Structural reforms are vital The time when countries could devaluate their own It makes more sense to focus on structural reforms currencies has passed, as has the time when the and more expansive fiscal policy if possible. interest differentials relative to Germany were Monetary policy is less effective at this juncture, minimal and pricing was inaccurate. If the currency since many households and businesses are less union is to survive, member-countries have to adopt interested in borrowing when they are busy trying to more effective economic policies, fiscal coordination clean up their balance sheets. has to improve, a single bank regulator has to be created, and the ECB, as a central bank, has to Structural reforms are the most important measure eliminate uncertainty about its role as lender of last for the PIIGS countries, which have lost competitive resort. Then the currency union would work better, ground in recent years due to their high cost levels even in a crisis. This will take time, but the sooner and often wasteful administration of public the road is staked out, the better. resources. Politicians in Greece, Italy, Spain and Portugal have to convince citizens that it is worth Cecilia Hermansson their while to pay taxes, that the money will be used effectively and that certain (often wealthy) groups won’t receive unfair tax breaks and exemptions. Swedbanks Ekonomiska sekretariat 105 34 Stockholm Swedbanks Månadsbrev om den Globala Ekonomin ges ut som en service till våra kunder. tfn 08-5859 7740 Vi tror oss ha använt tillforlitliga källor and bearbetningsrutiner vid utarbetandet av ek.sekr@swedbank.se analyser, som redovisas in publikationen. Vi kan dock inte garantera analysernas riktighet www.swedbank.se or fullständighet and kan inte ansvara for eventuell felaktighet or brist in grundmaterialet or bearbetningen därav. Läsarna uppmanas att basera eventuella (investerings-)beslut även Ansvarig utgivare på annat underlag. Varken Swedbank or dess anställda or andra medarbetare skall kunna Cecilia Hermansson, 08-5859 7720. göras ansvariga for forlust or skada, direkt or indirekt, på grund av eventuella fel or brister Magnus Alvesson, 08-5859 3341 som redovisas in Swedbanks Månadsbrev. Jörgen Kennemar, 08-5859 7730 3 (3)