Euler Hermes
Economic Outlook no. 1189-1190 |Macroeconomic, Risk and Insolvency Outlook
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Nevertheless, the latest confidence sur- veys in industry point to a gradual improvement in production in the medium term and, with the exception of the eurozone and Japan, household confidence surveys are rather positive in late 2012, in the BRIC countries.
The global policy mix, which is pro- growth on the whole – outside the eurozone – should begin to bear fruit. The monetary easing in advanced countries continues, no longer through key policy rates that remain at historic lows but rather by an extension of unconventional monetary policy measures in the United States (with a
Eurozone Focus
The consolidation is a long time coming
2012
will be remembered as a difficult year economically, socially and politically. It is now clear that 2012 will be the year when
the eurozone slipped back into recession, in an environment of accelerated deleveraging by both public and private sectors. But 2012 will also be recog- nized as a year of crucial progress in terms of eurozone governance, includ- ing the ratification of the European Stability Mechanism (ESM), the introduction of the ECB/ESM firewall, the incipient easing of Greece’s public debt burden through two restructuring operations and an agreement reached between the EU countries on the introduction of a joint banking su- pervisor for big banks.
Looking ahead, 2013 also promises to be turbulent. At the political level, legislative elections in Italy and Germany will continue to hold center stage. The former have al- ready given rise to uncertainty in light of recent developments (weakening of the technocrat government and early departure of Monti due to a return of Berlusconi) and could be brought forward to February, two months prior to the scheduled date. In Germany, while Angela Merkel is expected to keep her position as Chancellor fol- lowing the federal elections in September, probably as part of a "grand coalition”, but the potential of rival Peer Steinbrück, a centrist and former Finance Minister between 2005 and 2007, should not be underestimated.
All this could make certain decisions on eurozone governance more difficult. At a time when many are hoping to see concrete progress in terms of financial integra- tion, and also in terms of fiscal and political integration, there could be major disap- pointment should steps in this direction prove too slow and too small.
As a result, over the course of the next two years, the continuing excessive govern- ment borrowing requirements (especially in the Southern eurozone countries) are likely to continue to cast a shadow over the eurozone’s economic outlook, in an envi- ronment without economic growth and with overly restrictive financing rates. Also, the improvement in competitiveness in the eurozone countries, which is already un- derway in most Southern eurozone countries, and the elimination of internal imbal- ances within the eurozone are likely to take another few years before their positive impact on economic growth is felt.
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So it boils down to the same old question: how long will we have to wait before we see a real pooling of European debt (European Redemption Fund, Eurobills, Eu- robonds, etc.)? How much longer without growth and without new jobs? There is a risk that optimism will become the last remaining weapon in the face of growing eu- roskepticism: make-up or break-up?_AB
Economic forecasts
Change over the period, unless otherwise indicated: * contribution to GDP growth ** EUR bn
EUROZONE GDP
Consumer Spending Public Spending Investment
Construction Equipment
Stocks Exports Imports
Net exports Current account
Unemployment rate Wages
Inflation General government balance ** ** * * **
Current account (% of GDP) Employment
share 100%
57% 21% 19% 6%
14% 1%
48% 45% 3%
2011 1.5
0.1
-0.1 1.6 0.4 2.1 0.1 6.5 4.3 1.0 9
0.1 0.2
10.2 1.2 2.7
-386
General government balance (% of GDP) -4.1 Public debt (% of GDP) Nominal GDP
88 9,418 Sources: IHS Global Insight, Euler Hermes forecasts
2012 -0.5
-1.1 -0.2 -3.7 -5.0 -3.1 -0.7 2.8
-0.6 1.6 87
0.9
-0.7 11.4 0.6 2.5
-299 -3.1 90
9,500
2013 -0.1
-0.4 -0.6 -1.0 -1.8 -0.4 -0.1 1.9 0.9 0.5 74
0.8
-0.4 12.0 0.7 1.9
-250 -2.6 91
9,662 forecasts
2014 1.4
0.6
-0.1 2.3 1.0 3.5 0.1 4.5 3.7 0.6 66
0.7 0.4
12.1 0.5 1.8
-215 -2.2 91
9,981
fourth wave of quantitative easing), in Japan (with a new wave of quantitative easing of JPY 10 trillion), in the United Kingdom (with two further waves of GBP 50 billion and GBP 75 billion, respectively) and in the eurozone (LTRO2 and OMT). Within emerging countries, the monetary loosening continues: China has lowered its policy rates several times (-60 bp to 6%), Brazil has pressed ahead with the expansionary cycle that began in mid- 2011, so that the policy rate is now at an all-time low of 7.25% (-200 bp in 2012) while monetary policy in India also eased (-150 bp to 4.5%). As regards fiscal policy, facing the economic slow-
down, the major emerging countries opted to boost growth through infra- structure projects and measures to stimulate consumption. In the euro- zone, the lines are shifting, with the beginning of a reduction in the pace of fiscal consolidation, notably in the countries the worst hit by the crisis (support for the poorest classes, down- ward revision of budgetary targets).
2013-2014 risks: loaded political agenda, management of excess liquidity The (geo) political risk will mark the agenda in 2013. Political risks will be concentrated in the first half of 2013. First, in the United States, there is the
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