Tsok may 2012


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Tsok may 2012

  1. 1. EUROZONE AND FUTURE SCENARIOSNO PAIN, NO GAIN....The Italian-Slovak Chamber of Commerce Elena Kohútiková Deputy Chief Executive Officer VÚB, a.s. Bratislava, 23 May, 2012
  2. 2. Is this a Future of Europe? More than 50 percent of investors predict Eurozone to loose its member, as Greece’s election impasse threatens to push the debt crisis to new depths, according to Bloomberg Global Poll – In fact, a number of poll participants who predict a smaller euro area within a year ballooned in May to 57 percent from 11 percent in January 2011 80 % of 1,253 investors, analysts and traders who Markets are more bearish are Bloomberg subscribers expect further deepening of European debt crisis 55 percent of participants said backsliding by Europe posed a high risk to the world economy, while the number of those who said the same of a hard landing by China or gridlock among U.S. politicians is fewer than a half 2
  3. 3. Challenges for Europe and Eurozone Macroeconomic consolidation versus economic growth? Need of deeper cooperation and integration in EMU is not in contradiction to solve specific issues of individual countries Solidarity – not only EMU countries against the countries receiving help, but also those countries to countries providing the help Greece – a unique case? 3
  4. 4. Macroeconomic Consolidation versus Economic Growth?Era of positive mood and narrow spreads within the Eurozone has definitely gone Yields of 10-year government bonds since 1990, % p.a. 36 fixing exchange rates The Greek PSI talks (May 1998) (Aug 2011) 31 launching the 26 euro (Jan 1999) revision of greek debt (Oct 2009) 21 Greece joined the euro area 16 (Jan 2001) bankruptcy of Lehman 11 6 1 3/90 3/91 3/92 3/93 3/94 3/95 3/96 3/97 3/98 3/99 3/00 3/01 3/02 3/03 3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 Nemecko Španielsko Portugalsko Írsko Grécko Taliansko Belgicko Francúzsko Source: Bloomberg, VÚB 4
  5. 5. Macroeconomic Consolidation versus Economic Growth?While fourth quarter was in sign of deceleration, first quarter was alreadynegative for euro-area economy slipping into soft red numbers... Euro area economy growth is heavily affected by fiscal tightening GDP growth, historical and forecasted consensus values, % y/y forecast Odhad 3 1 -1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 USA -3 EA -5 Key Task – how to consolidate and grow? Do we have scenarios ready? Source: Bloomberg, VÚB 5
  6. 6. New challenge: Macroeconomic Consolidation versus Economic Growth= No! Consolidation AND GrowthTask of the day: not only fiscal consolidation and debt reduction, but moreoversimultaneously implementation of growth factors oriented not just to growth but at thesame time to solve the most urgent issues in individual countries: High unemployment – especially of young people – is the syndrome of lost generation threatening us? – supporting instruments of young people employment – supporting FDI and education and science Export competitiveness, also domestic demand in some countries – return to link the wage development to productivity growth Change of the ratio between the employed and unemployed part of population – it is not only an aging issue Restructuralisation, privatisation and FDI Who will finance the GROWTH? EIB, new EBRD? Banks? (Which? Almost all are markedly noted down by crisis), Basel III? Joint bonds? 6
  7. 7. Need of Deeper Cooperation and Integration in EMU is not inContradiction to Solve Specific Issues of Individual CountriesEU level – deeper Cooperation – higher Integration Improvement of economy governance EU reinforces financial market supervision Europe 2020 – restoring normal lending to economy, completing the Single Market, strengthening innovationSolution of the specific issues of Eurozone countries Ireland – is a success story Portugal – is on track Italy – starts far reaching austerity and reform programme Spain – committed to comprehensive adjustmentGreece – a unique case? 7
  8. 8. Greece – a Unique Case? Greece does not have a liquidity problem, but a SOLVENCY PROBLEM Eurozone Member States will continue to support Greece .... as long as Greece continues to implement the agreed conditionalityTwo potential Greek scenarios are still realistic:1. Greece will exit eurozone – either upon an agreement or impulsively – however, thus the problems are not being solved - currency devaluation, potential problems in banking sector and real economy will result into the urgency of hard consolidation2. Greece stays in eurozone, reforms will be imposed from „TROJKA“ - it requires also solidarity of Greek citizens with other countries of EMU – especially those who provide assistant , but also those countries that might by adversely affected by leaving Greece from eurozonePotential EMU and EU scenarios if Greece leaves EMU:1. Greece will be considered as a UNIQUE CASE2. Greece infection will be spread onto other countries being closely monitored by the market nowadays3. The end of the Monetary Union? And what about EU? 8
  9. 9. Thank you for your attention! 9
  10. 10. This presentation contains information that is subject to the intellectual property rightsof the author. You are not allowed to use this presentation or any of it part withoutauthorization. 10