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2019/08/13 11:22:39

Eurozone economy

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Content

Main article: European Union

Budget

In the budget for 2017 there were ten members of the EU which entered more, than they received from the EU, at least, in terms of direct money contributions. Great Britain took the second place in rating with net contributions about 7.5 billion euros. Germany, having headed rating, enclosed at 12.8 billion euros more, than received.

GDP

Dynamics

Coface: The GDP loudspeaker in the countries of the Eurozone since the II quarter 2017 till the I quarter 2019.
Coface: The GDP loudspeaker in the countries of the Eurozone since the II quarter 2017 till the I quarter 2019.

Forecasts

On June 29, 2012 Ernst & Young published the forecast and recommendations about development of economy of the Eurozone.

Optimum scenario of succession of events: moderate recession of economy in 2012 and slow recovery in 2013.

Under any circumstances, considering numerous negative factors, the eurozone economy in 2013 will be recovered slowly and, presumably, will grow by 0.4%.

In 2014 in process of gradual withdrawal from tough budget policy and acceleration of growth of world economy growth of economy of the eurozone by 1.7%, and in 2015 and 2016 – for 2% is predicted.

In spite of the fact that formation of the new government of Greece allowed to smooth somewhat concerns concerning disintegration of the eurozone, the summer release of the economic forecast for the countries of the eurozone prepared by Ernst & Young company shows that in the next six months it is necessary to expect deterioration in a situation in the European economy which at favorable succession of events sluggish recovery in 2013 will follow. At the same time there are many risks owing to which the reality can be worse than the forecast, especially, if political leaders of the countries of the eurozone whose meeting should take place this week in Brussels are not able to approve the mutually acceptable strategy of further actions.

The forecast is prepared on the basis of the assumptions that Greece will continue austerity program implementation, and other participants of the eurozone, in particular Spain and Italy, will be able to avoid serious financial shocks further. In this case the unwillingness to assume risk, observed now in financial markets and also in the environment of business and at the population, will begin to weaken towards the end of 2012.

Growth rates of the certain countries of the region strongly differ, reflecting the amplifying economic gap between the strongest, mainly northern, the countries of the eurozone and their southern neighbors. The noticeable difference in economic indicators was for the first time mentioned by us in the economic forecast for the countries of the eurozone prepared one and a half years ago and since then this gap increases quicker and quicker. And though some strongest countries of the eurozone avoided recession in 2012 and are going to reach moderate growth in 2013, the forecast for the peripheral countries does not assume resuming of economic growth up to 2014. At the same time in the peripheral countries unemployment, especially among youth, reached such level which poses a potential threat of public stability.

Financial system

National debt of the countries per capita

For the end of 2018
For the end of 2018

Banking sector (crediting)

  • Ernst & Young, June, 2012: Implementation of the second stage of the program of long-term refinancing by the European Central Bank (ECB) gave some relief which is positively met by the market and helped to reduce risk of inevitable credit crisis. Banks reported on stable observance by potential borrowers of the standards of solvency set for them, at the same time own liquid positions of banks and access to financing were also stabilized after sharp deterioration in 2011.

However at the beginning of the second quarter 2012 demand for the credits remained very low, and though credit crisis managed to be avoided, it affected little desire of the companies and consumers to raise borrowed funds.

  • Ernst & Young, on July 2, 2012: Andy Baldwin, the head of practice of Ernst & Young on rendering services to financial institutions in EMEIA region (Europe, the Middle East, India and Africa), so comments on a situation: "Though in 2012 banks already suffered influence of crisis of the eurozone, the main wave will cover the financial sector in 2013 when the share of the problem credits becomes much more, than it is possible to assume".

Lowering of the forecast for GDP growth of the eurozone up to 0.6% in 2012 and modest expectations of economic growth the next year at the level of 0.4% demonstrate new deterioration in a situation with the problem credits. If in March, 2012 analysts believed that the share of the problem credits in 2012 will reach record-breaking high level from the moment of creation of common currency, then today the forecast looks a little differently: by the end of 2012 the share of the problem credits will make 6.2%, and record-breaking high mark of 6.5% will be reached in 2013.

Mari Diron, the consultant for economic problems by preparation of the economic forecast of Ernst & Young for the sector of financial services of the countries of the eurozone, notes: "Owing to features of a business cycle the problem credits represent a time bomb for economy of the European countries. New lowering of the forecast for GDP growth of the eurozone caused deterioration in the forecast concerning the problem credits, at the same time the time of achievement of a peak mark was postponed for 2013. Many banks grant to the borrowers quite big delays that masks the actual specific weight of the problem credits in their loan portfolio. In process of further deterioration in an economic situation more and more credits will turn into category problem that will force banks to implement losses and further to limit crediting volumes".

According to the forecast, in 2012 banks of the countries of the eurozone will reduce the balances by 1.6 trillion euros as a result of sale of non-core assets and reduction of volumes of crediting. In particular, decrease in volumes of corporate and consumer loans will be even even more essential, than was predicted earlier. It is expected that volumes of crediting of corporate clients in 2012 will be reduced by 4.8%, and consumer loans will decrease by 6.6% – such rates of falling are record-breaking high in the category for the eurozone.

Mari Diron comments: "It will have significant effect on eurozone economy in general. Similar reduction of balances was not observed even during financial crisis of 2008-2009. Though partly this situation can be explained with decrease in demand for the credits, it will inevitably lead to aggravation of a problem of shortage of credit resources which generally will affect the companies of the small sizes – unlike large corporate borrowers to them more difficult to regroup means and to get access to alternative financing sources. In spite of the fact that volumes of crediting will slowly grow in Germany, reduction or restriction of crediting in other countries of the eurozone does not allow to speak about revival of activity in a segment of corporate crediting in the eurozone in general up to 2015".

Insurance

Ernst & Young, on July 2, 2012: Preserving traditionally of low interest rates negatively affects participants of the European sector of life insurance who are forced to find possibilities of reduction of a gap between the investment revenue and the minimum level of the guaranteed profitability put in the existing insurance products.

Andy Baldwin, the head of practice of Ernst & Young on rendering services to financial institutions in EMEIA region (Europe, the Middle East, India and Africa), notes: "Insurers experience considerable difficulties with ensuring payments for the insurance products sold in pre-crisis times. To receive dividends which expect insurers on products with the guaranteed profitability level, do not correspond to the level of an investment revenue which is available at the disposal of insurers now and which they will locate in the near future. The situation is also complicated by the current and future requirements for capital adequacy which will be caused by Solvency II implementation. Insurers should look for ways of reduction of deficit on the current portfolio and also to convince clients to purchase products with lower and less stable level of the guaranteed profitability and it when questions of capital preservation and ensuring reliable level of profitability most sharply are on the agenda any client. To reduce the existing gap, insurance companies try to optimize structure of the assets. As it is paradoxical, the most highly profitable assets are government bonds separate the states, but regulators not strongly recommend to make investments in such assets".

Asset management (investments)

Ernst & Young, on July 2, 2012: According to the forecast, in 2012 the volume of the assets which are in management will increase only by 1.4%. In 2011 asset cost, the participants of the sector of asset management of the countries of the eurozone who are in management decreased more than by 7% in comparison with 2010, and investments into the funds specializing in asset management were reduced by 12%, and direct investments – for 16% (the last was caused by reduction of the market of direct investments for 8% and failure of investors from individual share in assets).

Despite some revival of a situation in the first quarter 2012 when growth in the sector of asset management reached a point of 6%, in the second quarter the situation changed to the worst, most likely, under the influence of escalation of crisis of the sovereign debt in the eurozone which caused decrease in quotations in security markets and the next round of growth of yield on sovereign bonds of the peripheral countries of Europe again. In the developed macroeconomic situation participants of the sector of asset management should not expect that in 2012 they will manage to pay the losses suffered in 2011.

"Because of the remaining vigilance in the market investors in the short term, most likely, will invest means in the funds with diversified structure of assets guaranteeing absolute return rates. At the same time, considering toughening of requirements to funding of pension plans, it is possible to assume that in the next 20-30 years more than a half of savings will be directed to the pension funds. Thus, it is quite possible that a half of all means of the individuals which are in management will fall to the share of the pension funds", - Mari Diron, the consultant for economic problems notes by preparation of the economic forecast of Ernst & Young for the sector of financial services of the countries of the eurozone.

Consumer spendings

  • Ernst & Young, June, 2012: Deterioration in a situation in labor market, the low wages rise and uncertainty concerning the future of common currency have negative effect on consumer confidence. Except for Germany which population, according to the last researches, feels muted optimism the trust level of consumers in the countries of the eurozone continued to decrease in recent months.

Therefore according to the economic forecast for the countries of the eurozone in 2012 real consumer spendings will increase approximately by 0.9% in Germany and only for 0.2% in France whereas in the majority of other countries of the eurozone they remain at the previous level or will be reduced.

Taking into account the dissipating concerns concerning structure of the eurozone in 2013 the further growth of consumer spendings in the strongest countries at the level of 1% is predicted. However costs of households in the peripheral countries in 2013 will probably continue to be reduced and will resume growth only in 2014.

Currency

The diagram of euro exchange rate to ruble

The diagram of euro exchange rate to dollar

Energy carriers

Gasoline price

The card of petrol prices in the countries of the world for February 12, 2018
The card of petrol prices in the countries of the world for February 12, 2018

Branches of the economy

Industrial production

At the end of 2012 in the eurozone reduction of industrial output for 0.6% is expected (forecast of Ernst & Young, June, 2012)

Market of cars

Trade

Data for 2018
Data for 2018

Tourism

Data for 2018.
Data for 2018.

Telecom

Internet

Information technologies

MEDIA

Labor market

Unemployment

  • In June, 2012 unemployment in 17 countries of the eurozone made 11.2 percent that became a record for the entire period of observation (Eurostat)[1].

As notes Bloomberg, in May statistical offices recorded unemployment rate in 11.1 percent. The number of the unemployed in the region grew by 123 thousand up to 17.8 million people.

The leader in this indicator among member countries of the currency union is Spain. The lowest indicators of unemployment are observed in Austria (4.5%) and the Netherlands (5.1%).

The number of the unemployed in Spain was 5.7 million that 24.6 percent from all capable population of the country equal.

Unemployment in Italy according to the results of June grew to 10.8% that became a record with since 1999. The share of the working population made 56.9%, and a share of economically inactive citizens - 36.1%. The greatest number of the unemployed are the share of youth aged from 15 up to 24 years - among people of this age group 34.3 percent do not work.

In Germany the indicator was 6.8%, without having changed in comparison with last month. The number of the unemployed in the country was 2.89 million people.

The International Labour Organization (ILO) considers that the number of jobs is reduced because of the policy of the governments on decrease in budget expenditure which negatively affects economic growth. According to forecasts of the ILO if the authorities do not take measures for priming of economy, the number of the unemployed in the eurozone in the next 4 years can grow to 22 million people.

  • Ernst & Young, June, 2012: The increasing gap in economic indicators of the countries of the eurozone continues to strengthen discrepancies and in labor markets. The share of the unemployed reached nearly 25% in Spain, 22% in Greece and 15% in Portugal, at the same time on each of these markets rise in unemployment for the last six months was from 3% to 4%. It even more weakens domestic demand and reduces investment volume and also limits capability of the governments of these countries to implement plans for reduction of budget deficit. At the same time in Germany, Austria and the Netherlands unemployment remains at the level of lower than 6%.

  • Unemployment in April, 2012 in the eurozone updated a record and made 11 percent (data of Eurostat).

Record was also an April unemployment in Italy: according to preliminary data, it made 10.2 percent. As specifies the AGI agency, the indicator reached a record since 2004. In comparison with March unemployment grew by 0.1 percent, in year calculation the indicator increased by 2.2 percent.

On May 31, 2012 the upper house of the Italian parliament approved labor market reform according to which dismissal process will be simplified. Thus the authorities hope to stimulate employers to hire more new employees, first of all - youth. Besides, the government of the prime minister Mario Monti is going to introduce the absent payment system of doles.

  • Statistical offices keep account of unemployment in the eurozone since 1995.

Consumption

Tea

Consumption of tea per capita, kg a year. Data for 2018
Consumption of tea per capita, kg a year. Data for 2018