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

the European Sting Milestones

Featured Stings

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

The Cold War had an unintended side effect: It created a European wildlife paradise

Managing and resolving conflicts in a politically inclined group of team members

Can privatisation be the panacea for the lack of growth in Europe?

European Fund for Transition to support more workers made redundant

Trump questions US – Europe kinship, approaches Russia

Addressing the consequences of digitalisation in the Russia & CIS region

Eurozone: Retail sales and inflation point to recession

How fungi could save the world

EU Court of Justice invalidates Safe Harbour and the game for thousands US businesses suddenly changes

CEOs in these countries are more likely to go with their gut

The EU sides with China against the US; but has Germany capitulated to America?

WhatsApp to face scrutiny from EU regulators task force over data sharing with Facebook

Food safety: more transparency, better risk prevention

Commission presents far-reaching anti-tax evasion measures

If Macron defies Britain about the banks, Paris and London to clash over ‘La Manche’

We should look to nature for solutions to the global water crisis. Here’s why

Italy can stand the US rating agencies’ meaningless degrading

Ukraine: turning challenges into opportunities


Council Presidency: Floundering with the EU 2014 budget

What little Cameron got in Brussels seems enough to keep Britain in the EU

Will GDPR block Blockchain?

Greenpeace’s saints and sinners in the tech world

What will Germany look like after the next election?

Chinese Premier Li Keqiang’s speech from World Economic Forum’s Annual Meeting of New Champions

Poverty and social exclusion skyrocket with austerity

EU integration: MEPs want to end permanent opt-outs from EU law

1 million citizens try to create a new EU institution

Industry 4.0: Championing Europe’s fourth industrial revolution

Youth policy in Europe not delivering for young people

The impossible end of the war in Syria

More than 750 million people around the world would migrate if they could

Clamp down on illegal trade in pets, urge Public Health Committee MEPs

Congrats to the #FutureofMalta: a new age of voting

Eurozone: Negative statistics bring deflation and recession closer

A new crop of EU ‘Boards’ override the democratic accountability and undermine the EU project

EU Council: Private web data to be protected by…abusers

UN rights office appeals for peaceful Zimbabwe elections amid reports of intimidation

Germany and OSCE support an east-west dialogue in Ukraine without exclusions

The right approach to addressing overcapacity problem from a Chinese perspective

Greece bailout ends but with no substantial effect on citizens’ life

Yesterday’s “jokes” and sarcasm by Digital Single Market’s Vice President Ansip on EU member states’ right to protect their telco markets

Why today’s leaders need to know about the power of narratives

GSMA head urges regulators to help Europe regain leadership

Rohingya refugee shelters ‘washed away’ in Bangladesh monsoon rains: UN agency

Libya: UN Mission condemns deadly attack against police in country’s south-east

How will the NATO-EU competition evolve in the post Brexit era?

Lagarde’s metamorphoses, not a laughing matter

EU Council: The US airlines may freely pollute the European air

Volkswagen getting away with it in Europe

Mixed news about the Eurozone economy

Companies can help solve water scarcity. Here’s how

Progress in medical research: leading or lagging behind?

FROM THE FIELD: Sailing a traditional and sustainable path in Fiji’s tropical waters

Continue reforms to make growth work for all in Spain

To be fair or to be sustainable? That is the (retirement) question

It’s ‘time for concrete action’ says UN chief, welcoming inter-Korean agreement

Human trafficking, slavery reports and health of migrants in Libya

Businesses can lead a revolution in disability inclusion

Improved access to financial information to curb serious crime

The Eurogroup protects Germany and blames others

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