Eurozone: Statistics don’t tell the whole story

Algirdas Šemeta, Member of the European Commission in charge of Taxation and Customs Union, Audit and Anti-Fraud, participated in the conference entitled 'Towards implementing European Public Sector Accounting Standard', which was organised in Brussels by Eurostat, on 29 and 30 May 2013, (EC Audiovisual Services).

Algirdas Šemeta, Member of the European Commission in charge of Taxation and Customs Union, Audit and Anti-Fraud, participated in the conference entitled ‘Towards implementing European Public Sector Accounting Standard’, which was organised in Brussels by Eurostat, on 29 and 30 May 2013, (EC Audiovisual Services).

 

Government sector deficits in Eurozone after having peaked in 2009-2010 are now not only levelling out but actually decreasing. According to Eurostat, the EU statistical service, in the first quarter of 2013 “ the seasonally adjusted general government deficit to GDP ratio was -3.5 % in the euro area (EA-17) and -3.8 % in the European Union (EU-27). In the previous quarter it was -3.7 % in the EA-17 and -4.2 % in the EU-27”. During the same three-month period in Eurozone and EU-27 general government total revenue amounted to 46.5 % and 45.3 % of GDP respectively, while total expenditure amounted to 50 % and 49.1 % of GDP.

EU-27 and EA-17 quarterly government net lending (+)/ net borrowing (-), in % of quarterly GDP, seasonally adjusted

 

EU-27_and_EA-17_quarterly_government_net_lending_net_borrowing,_in_%_of_quarterly_GDP,_seasonally_adjusted,_2007Q1-2013Q1           Source: Eurostat

At this point it must be reminded that in the two-year period of 2009-2010 Eurozone and EU27 government deficits skyrocketed to the region of 7% of GDP on the average, because a number of EU countries nationalised the huge toxic assets of their banks. In a matter of months those EU governments undertook the obligations of their countries’ lenders amounting to tens of billions, thus triggering the credit crisis of the European Union. This was the case of Ireland, the UK, Spain and even Germany. In Greece, Portugal and Italy it was not the banks that sent the countries to their worst over indebtedness but the sovereign borrowers. All along during the first decade of the new Millennium successive Greek governments kept mindlessly borrowing in order to finance excessive public spending.

Deficits nearing 3%

Given that according to the European Union rules the allowed government deficit is set at 3% of GDP, Eurozone is now much closer to it than the EU27. The EU27 government deficit appears much larger than the relevant Eurozone figure because the United Kingdom’s fiscal deficits are persistently high in the region of 5% to 7% of the GDP. The large size of the British economy weighs heavily in the EU27 data. In short the UK exchequer didn’t borrow only to recapitalise almost all the major banks of the country back in 2008-2009 but also to finance excessive government spending.

Despite the persistent but now decreasing government deficits during the past few years, inflation was and is still kept at bay because the European Union and more so the Eurozone economy entered in a long-term recession. Inflation peaked in October 2011 with around 3% in both the EU27 and the euro area. Before and after that, monthly inflation pressures have been minimal with around 0% in the summer of 2009 and now 1.6% in July 2013. Low inflation readings though carry both good and bad news.

Low inflation

For one thing it’s good news because the European Economy appears competitive with very low price increases, but at the same time slow inflation pressures betray a persistent recession. In any case the European Union economy is now thought to have left behind the bottom of the curve and preparing to enter in the upwards pointing part of it (growth). This is an even more important accomplishment because the new growth path, albeit slow, will hopefully be attained and maintained without excessive government deficits and overspending artificially supporting it.

                          Annual inflation (%) in the euro area and European Union

image3       Source: Eurostat

The problem is however that the social and the political costs going together with the above mentioned recipe may prove unbearable for a number of Eurozone countries. The sociopolitical developments in the south have advanced deeply in a risky zone and the entire arrangement seems to be prone to accidents. Fragile coalition governments in Greece, Italy and Portugal may collapse at any moment.

 

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Eurozone business activity again on upwards path

Safer products: stepping up checks and inspections to protect consumers

Africa is creating one of the world’s largest single markets. What does this mean for entrepreneurs?

Central Asia bloc has important role in ‘peace, stability and prosperity’ beyond region, says Deputy UN chief

The vegan economy is booming – and Big Food wants a slice of it

EU free-trade agreements with Canada and US: imagine the fallout if put to national referendums

Yemen: ‘A great first step’ UN declares as aid team accesses grain silo which can feed millions

Countries should focus on labour market policies to help refugees and improve coordinated actions to tackle illegal immigration

Venezuelans brave torrential border river, face exploitation, abuse – UN urges greater protection

Negative inflation hits Eurozone, ECB to print and distribute one trillion euro earlier than expected

Fears for food security and the future of farming families, as Fall Armyworm spreads to Asia

Robots will soon be a necessity but they won’t take all our jobs

Eurozone: Statistics don’t tell the whole story

Security Council unanimously agrees to extend UN Cyprus Mission amid political impasse

Italy and Greece zeroed their fiscal deficits, expect Germany’s response

‘Power is not given, power is taken’, UN chief tells women activists, urging push-back against status quo

Bangladesh: Head of UN refugee agency calls on Asia-Pacific leaders to show ‘solidarity’ with Rohingya refugees

Climate change will force us to redefine economic growth

The economic cost of anti-vaccination movements in Italy

Rohingya cannot become ‘forgotten victims,’ says UN chief urging world to step up support

Humanitarian visas to avoid refugees’ deaths

5 ways governments can unleash the power of young entrepreneurs

This is why people live, work and stay in a growing city

In Chad, top UN officials say humanitarian response must go ‘hand in hand’ with longer-term recovery

Despite setbacks, ‘political will’ to end Yemen war stronger than ever: top UN envoy

Journey of my life

Celebrating the Customs Union: the world’s largest trading bloc turns 50

EU Budget: A Reform Support Programme and an Investment Stabilisation Function to strengthen Europe’s Economic and Monetary Union

A new catastrophic phase in the Syrian carnage

Germany to help China in trade disputes with Brussels

Moves to create a Kosovo army have ‘deteriorated relations’ with Serbia: UN peacekeeping chief

Here are 6 big ideas to help the environment

These are the cities with the biggest carbon footprints

The importance of the strategy of health of a country working in accordance with the theory

6 ways countries can prepare for the next infectious disease pandemic

UN, world leaders, condemn Sri Lanka terrorist attacks targeting churches, hotels, which leave more than 200 dead

As conflicts become more complex, ‘mediation is no longer an option; it is a necessity’, UN chief tells Security Council

Food safety: more transparency, better risk prevention

An ECB banker wants to change the European social model

EU decides “in absentia” of civil society

US – Russia bargain on Syria, Ukraine but EU kept out

Responsible Artificial Intelligence

India’s economy is an ‘elephant that is starting to run’, according to the IMF

Global aid needed for healthcare

Getting vaccinated should just be considered a human right?

There are now four competing visions of the internet. How should they be governed?

Ebola outbreak in DR Congo declared over, now let’s tackle other health challenges: WHO chief

ECB offers plenty and cheap liquidity to support growth in all Eurozone countries

4 things to know about the state of conflict today

Sahel crisis reaching unprecedented levels, warn top UN humanitarian officials

Medical workforce migration in Europe – Is it really a problem?

Does it pay for cities to be green?

FROM THE FIELD: Rohingya babies conceived out of ‘incomprehensible brutality’

Dramatic drop in South Sudan political violence since peace agreement signing

UN chief condemns deadly attacks in Afghanistan

Does May have enough time in Parliament to table a soft Brexit deal?

ILO warns of widespread insecurity in the global labour market

Eurozone recession subsides

Memoirs from a unique trip to China: “my new old dragon” (Part I)

Prolonged economic crisis and drought demands urgent response for Zimbabwe’s ‘hardest hit’: UN relief chief

More Stings?

Comments

  1. Statistics are an easy way out for people in the financial sector .

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s