1. Finants- ja majandusolukord Euroopas
(ja Eestis)
Ingrid Toming,
Majandus- ja rahandusküsimuste direktoraat
10 November 2008
Welcome
Forecasts is never an easy task
But it’s even more perilous in the current exceptional times we are living
But we have to do it, and here we go!

2. Finantskriis, selle kulg ja põhjused Euroopa Komisjoni sügisprognoos
Teemad
Finantskriis, selle kulg ja põhjused
Euroopa Komisjoni sügisprognoos
Küsimused ja vastused
In a nutshell, what I can I tell you?
The financial crisis deepened and broadened this autumn.
MSs have taken important measures …
… but the situation remains precarious.
Crisis not yet over
This means weaker growth
The crisis is aggravating housing-market corrections and/or macroeconomic imbalances in several countries
At a time when confidence is falling
and external demand is also fading rapidly
On the positive side, inflationary pressures are easing.
on the one hand, oil prices have been falling since July …
…but it also reflects a significantly weaker growth
Both labour markets and public finances are set to deteriorate
The economic situation is therefore exceptionally uncertain.
European Commission

3. Finantskriisi peamised põhjused
Viimaste aastate hea majandusolukord: kõrge likviidsus, madalad intressimäärad, kadunud riskitajuvus
Finantsinnovatsioon
Liigsed riskid finantssüsteemis
Finantsjärelevalve ei suutnud kõiki riske arvesse võtta
In a nutshell, what I can I tell you?
The financial crisis deepened and broadened this autumn.
MSs have taken important measures …
… but the situation remains precarious.
Crisis not yet over
This means weaker growth
The crisis is aggravating housing-market corrections and/or macroeconomic imbalances in several countries
At a time when confidence is falling
and external demand is also fading rapidly
On the positive side, inflationary pressures are easing.
on the one hand, oil prices have been falling since July …
…but it also reflects a significantly weaker growth
Both labour markets and public finances are set to deteriorate
The economic situation is therefore exceptionally uncertain.
European Commission

4. Finantskriisi peamised etapid
Juuli – september 2007: materialiseeruvad USA kinnisvaraturu esimesed kahjumid, probleemid Bear Sterns fondis ja Northen Rockiga. Turud kaotavad usalduse ja likviidsus hakkab kokku kuivama
September – detsember 2007: pärast pankade päästmisoperatsioone hakkab olukord paranema, kuid 3. kvartali tulemused jätavad soovida
Jaanuar – märts 2008: Bear Sterns probleemid, USA valitsus käivitab uue päästeoperatsiooni
Märts – oktoober 2008: likviidsus kuivab jätkuvalt kokku, pangad ei usalda üksteist. Lehman Brothers pankrott paneb turud sisuliselt seisma; ilmsiks tulevad paljud uued probleemid
Oktoober: programmide käivitamine USAs ja Euroopas, mis päästab hullemast, kuid olukord on jätkuvalt pingeline…
In a nutshell, what I can I tell you?
The financial crisis deepened and broadened this autumn.
MSs have taken important measures …
… but the situation remains precarious.
Crisis not yet over
This means weaker growth
The crisis is aggravating housing-market corrections and/or macroeconomic imbalances in several countries
At a time when confidence is falling
and external demand is also fading rapidly
On the positive side, inflationary pressures are easing.
on the one hand, oil prices have been falling since July …
…but it also reflects a significantly weaker growth
Both labour markets and public finances are set to deteriorate
The economic situation is therefore exceptionally uncertain.
European Commission

5. Financial crisis deepened and broadened rapidly
(Corporate spreads over euro-area government bonds)
Last two years
Last two months
This graph illustrates how the crisis is affecting financing conditions:
the unusually-high spreads between corporate debt and government reflects the exceptionally high degree of uncertainty
(two picks: Bear Sterns and Lehman)
Central banks are working hard to fight a global liquidity squeeze
MSs also adopted massive rescue action plans for banks mixing recapitalisation and guarantees to restart interbank lending
Modest progress since then can be seen in the second chart on the right, but the situation is far from having normalised.
European Commission

6. Peamised meetmed Keskpangad Intressimäärade alandamine Lisalikviidsus
Valitsused
Hoiuste tagamise skeemid
Lisakapital pankadele
Pankade ülevõtmised
In a nutshell, what I can I tell you?
The financial crisis deepened and broadened this autumn.
MSs have taken important measures …
… but the situation remains precarious.
Crisis not yet over
This means weaker growth
The crisis is aggravating housing-market corrections and/or macroeconomic imbalances in several countries
At a time when confidence is falling
and external demand is also fading rapidly
On the positive side, inflationary pressures are easing.
on the one hand, oil prices have been falling since July …
…but it also reflects a significantly weaker growth
Both labour markets and public finances are set to deteriorate
The economic situation is therefore exceptionally uncertain.
European Commission

7. Finantskriis jõuab reaalmajandusse
Üldine ebakindlus
Kallimad laenud ja karmimad tingimused
Välisnõudlus langeb
In a nutshell, what I can I tell you?
The financial crisis deepened and broadened this autumn.
MSs have taken important measures …
… but the situation remains precarious.
Crisis not yet over
This means weaker growth
The crisis is aggravating housing-market corrections and/or macroeconomic imbalances in several countries
At a time when confidence is falling
and external demand is also fading rapidly
On the positive side, inflationary pressures are easing.
on the one hand, oil prices have been falling since July …
…but it also reflects a significantly weaker growth
Both labour markets and public finances are set to deteriorate
The economic situation is therefore exceptionally uncertain.
European Commission

8. Finantskriisi mõju jõuab reaalmajandusse
Some figures, and technical assumptions:
Global growth is set to fall this year and in During 2010, growth is expected to rise gradually
Excluding the EU, global growth is projected at 4.3% in 2008 and 2.9% in 2009 before accelerating to 3.8% in 2010.
US growth is expected to decline to 1.5% this year. In 2009 we expect it will be in negative territory of -0.5%
China will continue to grow at robust rates although less strongly than in previous years
Oil prices have come down sharply, but remain high.
Interest rates have not increased much since the spring, reflecting the flight-to-quality, but this masks a sharp increase in the costs of capital for households and enterprises
European Commission

9. Komisjoni sügisprognoos
GDP in 2008 is expected to be 1.4% in the EU (1.2% in the EA). This is less than half the outcome in 2006 and 2007, clearly below potencial.
In 2009, the European growth engine is at a standstill since Q2.
But the situation ought to recover in 2010 (next slide)
Investment, in particular, will fall dramatically in 2009, hence our accent last week, in the Communication on a Framework for a Recovery.
The slowdown should ease inflationary pressures, increasing the purchasing power of households.
But employment will decrease in 2009 (-0,5 in the EU and -0,4 in the EA) and unemployment will increase 0.8 pp in both areas in 2009
and the overall budgetary balance will also deteriorate (I will come back to this point)
The current account balance of euro area comes close to balance as imports are set to decrease more than exports. Euro is now close to fundamentals.
European Commission

10. EL majandus jääb järgmisel aastal seisma
Profile: we expect gradual recovery from the second part of 2009
Mainly based in internal demand, in particular investment recovery and employment net creation
External demand will contribute very little.
Our aim:
Slowdown as shorter as possible
Limit the impact on jobs
Prepare the economy for a sound recovery
Never more the errors that led to the present financial crisis
European Commission

11. Komisjoni sügisprognoos: majanduskasv
The growth rate downward swing between 2007 and 2009 is very strong in some MS’s.
Baltics, IRL, the biggest
UK, ES, LU, SI, FI, NL, also important
On average: 2,6 in EA, 2,7 in EU-27
European Commission

12. Komisjoni sügisprognoos: inflatsioon
Inflation eases, from 3.5 to 2.2 in the EA;
From 3.9 to 2.4 in the EU-27
Divergences shrink: SI, still the higher in the EA (from 6.2 to 3.7)
BG and the Baltics outside.
Good for euro-area enlargement perspectives,
If deficits are under control
European Commission

13. Komisjoni sügisprognoos: eelarveseis halveneb
This slide shows the impact on public finances in a more detailed way
After reaching the best position since 2000, the average deficit will increase from less than 1% of GDP in 2007 in the EU to 1.6% in 2008, 2.3% in 2009 and 2.6% in 2010,
For the euro area, the deficit is expected to rise from 0.6 to 1.3% this year and 1.8% in 2009 and 2% in 2010.
The outlook is also particularly uncertain due to uncertainties over the fiscal implications of the guarantees, bail-outs and recapitalisation of banks.
European Commission

14. Komisjoni sügisprognoos: eelarve
Public finances will deteriorate in most countries, with significant differences.
Overall, seven Member States are currently projected to breach and/or stay over the 3% of GDP reference value in 2009 (Ireland, France, Latvia, Lithuania, Hungary, Romania and the United Kingdom –Hungary and the United Kingdom already under EDP).
The projected deterioration is particularly sharp for Ireland.
Other countries with marked deterioration: UK, LV, EE, ES, and even still in surplus DK, SW, CY
Let me note here that the Hungarian figures do not take into account the recent government measures linked with IMF and Eu support.
European Commission

15. Küsimused ja kommentaarid teretulnud!
Horizon is dark, recession is a real risk for some countries, EA
and EU.
This is the main reason for our Framework for action, presented
last week
Eurogroup and ECOFIN should discuss and adopt clear position:
we need coordinated action to help recovery. We need investments
This is the rigth message for E. Council the 7th and Washington
the 15th
I urged MS’s to discuss ideas and come up with clear priorities
for expenditure and reforms.
European Commission