Folie 1 Optionen für die Eurozone Dr. Daniel Stelter ‹Nr.› 1 The two problems of the euro zone Note: debt data based on unconsolidated total liabilities (for corporates only loans) at market prices (exception: Belgium non-financial sector debt is consolidated) Source: Eurostat; bto analysis Too much debt Competitiveness 500 450 400 350 300 250 200 150 100 50 0 Total debt (% of GDP) 348 241 419 188 241 183 309 199 251 213 210 191 259 182 254 229 2000 2011 130 120 110 100 0 150 140 Unit labor costs, Q1 2000 = 100 2000 2012 ‹Nr.› 2 How to solve the euro crisis? Source: Robert Gordon, "Is U.S. economic growth over? Faltering innovation confronts the six headwinds", NBER Working Paper 18315, http://www.nber.org/papers/w18315 Address debt overhang Restore com-petitiveness Internal devaluation 1 Permanent transfers from north to south 2 Grow out of the problem 3 ? ? Organized debt restructuring and growth agenda 4 The inflation solution 5 ? ? Debt restructuring and Euro zone exits 6 ‹Nr.› 3 Stereotyping in Europe Source: PEW Research Center Who is Trustworthy, Arrogant and Compassionate EU nation most likely to be named... ‹Nr.› 4 Joint restructuring the euro zone debt overhang Source: Eurostat; bto analysis Pooling excess debt Roll-in of government debt > 60% of GDP per country Funding for private sector recapitalizations for debt > 90% of GDP per sector and country Refinancing with Eurobonds Features Jointly guaranteed to obtain AAA rating and low rates Staggered maturities matching repayment profile Repayment over 20 years €5.1T Eurozone redemption fund Accompanying measures Structural and fiscal reforms Limits on new indebtedness Measures to reduce private debt LT < 60% of GDP Private households €6T €0.3T Non-fin. Corp. €7T €1.1T Government €5.5T €3.7T >60% of GDP >90% of GDP Repayment options Each country repays own debt Reallocation for GIPS debt to Euro zone average (55% of GDP) Reallocation for all countries according to GDP Euro zone wide wealth tax on household assets ‹Nr.› 5 Without reallocation, debt service costs Option I: No reallocation No reallocation Debt burden for Greece already reduced after haircut 1. Costs p.a. based on 20 year repayment horizon, interest rate for pooled debt of 2.75%, forecasts for euro zone inflation 2.1%, and real growth 1.7% plus an additional 0.5% growth following structural reforms (different growth forecast assumed for each country) Note: Excess debt (above 60% for governments, and above 90% of GDP each for household and for non-fin. corporations) is assumed to be pooled and paid down by raising extra taxes. Debt refers to non-consolidated gross debt (exception: Greek government debt is consolidated and Belgium non-financial sector debt is consolidated). Data for LTM Q3 2011 (pro-forma after Greek haircut). Source: Eurostat; ECB; EIU forecasts; bto analysis 1,000 500 1,500 0 Total excess debt and costs to repay over 20 years per country (B€) % GDP p.a.1 % Fin. Ass. p.a.1 Excess debt to GDP 51% 2.3% 1.1% 57% 2.4% 0.9% 49% 2.2% 1.1% 27% 1.2% 0.7% 63% 2.8% 1.3% 72% 3.2% 2.0% 49% 2.4% 2.0% 67% 3.1% 1.0% 179% 7.0% 3.6% 108% 5.4% 2.4% EZ  ‹Nr.› Reallocation of GIPS excess debt manageable Option II: Reallocation to GDP for GIPS Excess debt burden for GIPS reduced to 54% of GDP, for all other countries increased by 4–5 pp 1. Costs p.a. based on 20 year repayment horizon, interest rate for pooled debt of 2.75%, forecasts for euro zone inflation 2.1%, and real growth 1.7% plus an additional 0.5% growth following structural reforms (different growth forecast assumed for each country) Note: Excess debt (above 60% for governments, and above 90% of GDP each for household and for non-fin. corporations) is assumed to be pooled and paid down by raising extra taxes. Debt refers to non-consolidated gross debt (exception: Greek government debt is consolidated and Belgium non-financial sector debt is consolidated). Data for LTM Q3 2011 (pro-forma after Greek haircut). Source: Eurostat; ECB; EIU forecasts; bto analysis % GDP p.a.1 % Fin. Ass. p.a.1 Excess debt to GDP EZ  51% 2.3% 1.1% 63% 2.6% 1.0% 56% 2.5% 1.2% 34% 1.5% 0.8% 69% 3.1% 1.4% 51% 2.3% 1.4% 49% 2.4% 2.0% 74% 3.4% 1.1% 51% 2.0% 1.0% 51% 2.6% 1.1% 1,500 0 500 1,000 Total excess debt and costs to repay over 20 years per country (B€) Reallocation of excess debt from GIPS to other countries ‹Nr.› High inflation differential required to realign competitiveness 1.Based on Goldman Sachs calculation: The realignment is supposed to achieve external debt sustainability, so that the net foreign asset or debt position reduces to less than 25% of GDP 2. Average for 2010-12 Source: Thomson Reuters Datastream (Eurostat), CesIfo Working Paper No 4086, Goldman Sachs, European Economic Analyst No 3/2013; bto analysis 5 4 3 2 1 0 8 7 6 Euro zone avg. = 3.6 0.0 0.0 0.0 1.3 2.5 3.8 5.5 ‹Nr.› Only together can we make it happen! Deal with the debt problem Reform labor markets Improve education Implement smart immigration policy Redemption fund ‹Nr.›
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Optionen für die Eurozone

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Optionen für die Eurozone. Dr. Daniel Stelter. The two problems of the euro zone. Too much debt. Competitiveness. Total debt (% of GDP). Unit labor costs, Q1 2000 = 100. 500. 150. 450. 419. 140. 400. 348. 350. 309. 130. 300. 259. 254. 251. 241. 250. 210. 120. 200. - PowerPoint PPT Presentation
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Folie 1 Optionen für die Eurozone Dr. Daniel Stelter ‹Nr.› 1 The two problems of the euro zone Note: debt data based on unconsolidated total liabilities (for corporates only loans) at market prices (exception: Belgium non-financial sector debt is consolidated) Source: Eurostat; bto analysis Too much debt Competitiveness 500 450 400 350 300 250 200 150 100 50 0 Total debt (% of GDP) 348 241 419 188 241 183 309 199 251 213 210 191 259 182 254 229 2000 2011 130 120 110 100 0 150 140 Unit labor costs, Q1 2000 = 100 2000 2012 ‹Nr.› 2 How to solve the euro crisis? Source: Robert Gordon, "Is U.S. economic growth over? Faltering innovation confronts the six headwinds", NBER Working Paper 18315, http://www.nber.org/papers/w18315 Address debt overhang Restore com-petitiveness Internal devaluation 1 Permanent transfers from north to south 2 Grow out of the problem 3 ? ? Organized debt restructuring and growth agenda 4 The inflation solution 5 ? ? Debt restructuring and Euro zone exits 6 ‹Nr.› 3 Stereotyping in Europe Source: PEW Research Center Who is Trustworthy, Arrogant and Compassionate EU nation most likely to be named... ‹Nr.› 4 Joint restructuring the euro zone debt overhang Source: Eurostat; bto analysis Pooling excess debt Roll-in of government debt > 60% of GDP per country Funding for private sector recapitalizations for debt > 90% of GDP per sector and country Refinancing with Eurobonds Features Jointly guaranteed to obtain AAA rating and low rates Staggered maturities matching repayment profile Repayment over 20 years €5.1T Eurozone redemption fund Accompanying measures Structural and fiscal reforms Limits on new indebtedness Measures to reduce private debt LT < 60% of GDP Private households €6T €0.3T Non-fin. Corp. €7T €1.1T Government €5.5T €3.7T >60% of GDP >90% of GDP Repayment options Each country repays own debt Reallocation for GIPS debt to Euro zone average (55% of GDP) Reallocation for all countries according to GDP Euro zone wide wealth tax on household assets ‹Nr.› 5 Without reallocation, debt service costs Option I: No reallocation No reallocation Debt burden for Greece already reduced after haircut 1. Costs p.a. based on 20 year repayment horizon, interest rate for pooled debt of 2.75%, forecasts for euro zone inflation 2.1%, and real growth 1.7% plus an additional 0.5% growth following structural reforms (different growth forecast assumed for each country) Note: Excess debt (above 60% for governments, and above 90% of GDP each for household and for non-fin. corporations) is assumed to be pooled and paid down by raising extra taxes. Debt refers to non-consolidated gross debt (exception: Greek government debt is consolidated and Belgium non-financial sector debt is consolidated). Data for LTM Q3 2011 (pro-forma after Greek haircut). Source: Eurostat; ECB; EIU forecasts; bto analysis 1,000 500 1,500 0 Total excess debt and costs to repay over 20 years per country (B€) % GDP p.a.1 % Fin. Ass. p.a.1 Excess debt to GDP 51% 2.3% 1.1% 57% 2.4% 0.9% 49% 2.2% 1.1% 27% 1.2% 0.7% 63% 2.8% 1.3% 72% 3.2% 2.0% 49% 2.4% 2.0% 67% 3.1% 1.0% 179% 7.0% 3.6% 108% 5.4% 2.4% EZ  ‹Nr.› Reallocation of GIPS excess debt manageable Option II: Reallocation to GDP for GIPS Excess debt burden for GIPS reduced to 54% of GDP, for all other countries increased by 4–5 pp 1. Costs p.a. based on 20 year repayment horizon, interest rate for pooled debt of 2.75%, forecasts for euro zone inflation 2.1%, and real growth 1.7% plus an additional 0.5% growth following structural reforms (different growth forecast assumed for each country) Note: Excess debt (above 60% for governments, and above 90% of GDP each for household and for non-fin. corporations) is assumed to be pooled and paid down by raising extra taxes. Debt refers to non-consolidated gross debt (exception: Greek government debt is consolidated and Belgium non-financial sector debt is consolidated). Data for LTM Q3 2011 (pro-forma after Greek haircut). Source: Eurostat; ECB; EIU forecasts; bto analysis % GDP p.a.1 % Fin. Ass. p.a.1 Excess debt to GDP EZ  51% 2.3% 1.1% 63% 2.6% 1.0% 56% 2.5% 1.2% 34% 1.5% 0.8% 69% 3.1% 1.4% 51% 2.3% 1.4% 49% 2.4% 2.0% 74% 3.4% 1.1% 51% 2.0% 1.0% 51% 2.6% 1.1% 1,500 0 500 1,000 Total excess debt and costs to repay over 20 years per country (B€) Reallocation of excess debt from GIPS to other countries ‹Nr.› High inflation differential required to realign competitiveness 1.Based on Goldman Sachs calculation: The realignment is supposed to achieve external debt sustainability, so that the net foreign asset or debt position reduces to less than 25% of GDP 2. Average for 2010-12 Source: Thomson Reuters Datastream (Eurostat), CesIfo Working Paper No 4086, Goldman Sachs, European Economic Analyst No 3/2013; bto analysis 5 4 3 2 1 0 8 7 6 Euro zone avg. = 3.6 0.0 0.0 0.0 1.3 2.5 3.8 5.5 ‹Nr.› Only together can we make it happen! Deal with the debt problem Reform labor markets Improve education Implement smart immigration policy Redemption fund ‹Nr.›
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