8 january acca (athens) - greece and the eurozone endgame

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  • The poorer & more services-focused the country, the lower the threshold
  • The poorer & more services-focused the country, the lower the threshold
  • The poorer & more services-focused the country, the lower the threshold
  • The poorer & more services-focused the country, the lower the threshold
  • The poorer & more services-focused the country, the lower the threshold
  • 8 january acca (athens) - greece and the eurozone endgame

    1. 1. AGENDA• The story so far• Greece: a brief update• The limits of austerity• The EU roadmap• The mechanics of contagion• What hope for reform? The global body for professional accountants
    2. 2. 1. The story so far. The global body for professional accountants
    3. 3. Sovereign InvestmentGreen shoots debt crisis stalls Inflation peaks, Africa slows FukushimaStimulus Investment stalls China slowdown Uncertainty peaks US politics, fundamentals The global body for professional accountants
    4. 4. 40302010 0-10-20 Americas Middle East-30 Asia Pacific Central and Eastern Europe-40 South Asia Western Europe-50 Africa-60 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 The global body for professional accountants
    5. 5. IS IT ALL DOWN TO EUROPE?• Stimulus withdrawal (incl. China)• Bank capitalisation & Basel III• Household and corporate deleveraging• Falling imports• Corporate cash hoarding• Conflict & civil unrest• Uncertainty The global body for professional accountants
    6. 6. WHAT IS THE EURO CRISIS?• Debt sustainability & market access • Bank capitalisation, leverage & liquidity• Contagion • De-integration & bank-sovereign loops• Falling output; permanent capacity loss • Loss of human and social capital• Incomplete EU institutional framework • Stretching of legitimacy and mandates The global body for professional accountants
    7. 7. 2. Greece: a brief summary The global body for professional accountants
    8. 8. The global body for professional accountants
    9. 9. Bank of Greece (2012) Report on the Recapitalisation of Greek Bankshttp://www.bankofgreece.gr/BogEkdoseis/Report_on_the_recapitalisation_and_restructuring.pdf The global body for professional accountants
    10. 10. The global body for professional accountants
    11. 11. CREDIT (1) TO THE DOMESTIC PRIVATE SECTOR(Outstanding amounts and net flows (2) in EUR millions) % change Nov 2011-12Ι. TOTAL -4.6%ΙΙ. ENTERPRISES -5.4% ΙΙΑ. NON-FINANCIAL CORPORATIONS -4.1% 1. Agriculture -7.0% 2. Industry -4.2% 2.1 Mining and Quarrying -3.6% 2.2 Manufacturing -4.2% 3. Trade -8.3% 4. Tourism 0.8% 5. Shipping -3.1% 6. Construction -5.0% 7. Electricity - Gas - Water 6.3% 8. Storage and Transport services excl. Shipping -6.4% 9. Remaining branches -3.8% 9.1 Information and Communication -4.1% 9.2 Real Estate Activities -0.3% 9.3 Professional and other activities -14.7% 9.4 Other -1.1% ΙΙΒ. INSURANCE & OTHER FINANCIAL -24.2%ΙΙI. UNINCORPORATED ENTERPRISES -2.8%ΙV. INDIVIDUALS ETC (2) -3.9% 1. Housing loans -3.5% 2. Consumer credit -5.1% The global body for professional accountants 3. Other loans 0.5%
    12. 12. The global body for professional accountants
    13. 13. The global body for professional accountants
    14. 14. The global body for professional accountants
    15. 15. The global body for professional accountants
    16. 16. 3. The limits of austerity. The global body for professional accountants
    17. 17. The global body for professional accountants
    18. 18. The global body for professional accountants
    19. 19. IMF: “We got fiscal multipliers wrong. We assumed 0.5; they are between 0.9 and 1.7”The global body for professional accountants
    20. 20. Value-added business opportunities Austerity New orders Access to falling growth Sector-specific capital factors Global economy seen as making progressBusiness Poor size policies Very good Revenues policies falling Unstable More significant influence on confidencecustomers ACCA/IMA 2012: Global Economic Conditions Survey Q4 2011 The global body for professional accountants
    21. 21. Unstable Sector- suppliers specific Potential for new orders? Unstable Finance & Poor customers Gov support Falling policy revenues ‘Excessive’ Profitable‘Excessive’ Falling new austerity SME projects spending orders Global More significant influence on investment Economy improving ACCA/IMA 2012: Global Economic Conditions Survey Q4 2011 The global body for professional accountants
    22. 22. Labour taxes only Capital taxes only Labour &capital taxes Real 10 yr yields Max add tax Max interest Max add tax Max interest Max add tax Max interest GDP Cons yield/GDP rate yield/GDP rate yield/GDP rate 42.7% is the limit!Mathias Trabandt & Harald Uhlig, 2012. "How Do Laffer Curves Differ Across Countries?," NBER Chapters, in: Fiscal Policy after theFinancial Crisis, National Bureau of Economic Research, Inc. The global body for professional accountants
    23. 23. DEBT SUSTAINABILITY• Debt < (NPV of future fiscal surpluses)• This is a moving target in every way.• In practice, policymakers use arbitrary thresholds • 120% debt/GDP is the best example• Prisoners of austerity v. prisoners of liquidity The global body for professional accountants
    24. 24. Arlsanalp & Tsuda, 2012. “Tracking global demand for advanced economy sovereign debt," IMF Working Papers 12/284,International Monetary Fund The global body for professional accountants
    25. 25. The global body for professional accountants
    26. 26. The global body for professional accountants
    27. 27. NOT ALL AUSTERITY IS THE SAME1. Improved tax administration2. Improved procurement etc3. Benefits cuts4. Public consumption cuts5. Direct tax hikes6. Public investment cuts7. Indirect tax hikes The global body for professional accountants
    28. 28. The global body for professional accountants
    29. 29. Quick Q&A Break? The global body for professional accountants
    30. 30. 4. The EU Roadmap. The global body for professional accountants
    31. 31. 6-pack Single (macro imbalances, Supervisory budget surveillance, co- Mechanism ordination and Recovery and CRD / CRR IV Resolution enforcement) Deposit Directive Treaty on stability, Guarantee Single resolution coordination & Scheme mechanism governance (fiscal Directive compact) ESM Operational Co-ordination of Framework national reformsReform andsolidarity‘contracts’ Participation of Parliaments and ECB Outright Monetarybetween MS Transactionsand EU EP in furtherinstitutions integration The global body for professional accountants
    32. 32. The global body for professional accountants
    33. 33. Worse, what if Europe isn’t solvent? The global body for professional accountants
    34. 34. Delia Velculescu, 2010. "Some Uncomfortable Arithmetic Regarding Europe’s Public Finances," IMF Working Papers10/177, International Monetary Fund The global body for professional accountants
    35. 35. Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2010Revision, http://esa.un.org/unpd/wpp/index.htm The global body for professional accountants
    36. 36. The global body for professional accountants
    37. 37. 5. The Mechanics of Contagion. The global body for professional accountants
    38. 38. The global body for professional accountantsAntonakakis, N. and Vergos, K. (2012) ‘Sovereign bond yield spillovers in the Euro zone during the financial and debt crisis’ MPRA 12/2012http://mpra.ub.uni-muenchen.de/43284/1/BYS_MPRA.pdf
    39. 39. Labour taxes only Capital taxes only Labour &capital taxes Real 10 yr yields Max add tax Max interest Max add tax Max interest Max add tax Max interest GDP Cons yield/GDP rate yield/GDP rate yield/GDP rateMathias Trabandt & Harald Uhlig, 2012. "How Do Laffer Curves Differ Across Countries?," NBER Chapters, in: Fiscal Policy after theFinancial Crisis, National Bureau of Economic Research, Inc. The global body for professional accountants
    40. 40. The global body for professional accountants
    41. 41. The global body for professional accountants
    42. 42. The global body for professional accountants
    43. 43. 6. What future for reform? The global body for professional accountants
    44. 44. The global body for professional accountants
    45. 45. The global body for professional accountants
    46. 46. The global body for professional accountants
    47. 47. INEFFICIENCY COSTS REVENUE• Low returns on public spending• Loss of revenue due to poor tax administration• Lower tax morale• More so in a recession The global body for professional accountants
    48. 48. Thanks! The global body for professional accountants

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