In the sixth year of the crisis of the euro area, it is time to review whether adjustment to external imbalances in the euro area is working. Current accounts have dramatically adjusted in a number of countries of the euro area as the graph below shows. Read more
Bruegel blog
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Chart of the week: Is external adjustment working in the euro area?
12th March 2013
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Charts of the week: funding costs keep coming down in the wave of euro optimism
31st January 2013
Funding costs in the euro area have continued to decrease since Mario Draghi’s July announcement. This blog post updates our previous data covering the insurance cost of the 5 major financial and non-financial corporations and the governments of France, Germany, Italy and Spain. Read more
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A banking union of 180 or 91%?
13th December 2012
The European finance ministers have agreed on a deal for the banking union. According to the deal, the ECB would be directly responsible for banks with assets exceeding 30bn euro or 20% of GDP, or at least the 3 largest banks of each country member for those nations where fewer than three fulfil the previous criteria. In this chart of the week, we applied the two criteria to the Banker dataset, which includes 754 banks in the euro zone, so 14% of the 5404 banks. In terms of assets, a comparison between the Banker database and ECB aggregate statistics shows a good overall coverage of the banking system. Read more
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Chart of the week: a deadly embrace
4th December 2012
Europe is determined to break the vicious circle between sovereigns and banks. To achieve this aim, it appears to be clear that Europe will need a strong central supervisor, a common resolution authority as well as the appropriate fiscal backstop to help in case of major crisis when the resources of the resolution fund are exhausted. As Europe is advancing its work on the banking union, the increased dependence of banks on their sovereigns in the last year has not received sufficient attention. An important reason for the link between banks and sovereigns is the fact that banks are holding government bonds on their books. Already before the crisis, European banks were holding large amounts of sovereign debt on their… Read more
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Chart of the week: updated monthly real effective exchange rates for 153 countries and the euro area
29th November 2012
Bruegel Working Paper 2012/06 includes data for 178 countries and the euro area, while the monthly database includes 153 countries and the euro area. We have updated the monthly database up to November 2012. November is not yet over and therefore we approximated the nominal exchange rate with the average during 2 to 26 November. Data of the last few days of the month may change this average, but presumably by not much. Consumer price indices are available till October for most countries and for a number of countries one or more earlier months are also missing. Similarly to the procedure of the Working Paper, we projected the missing data up to October 2012 and the not-yet available data of… Read more
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Chart of the week: fiscal deficits in the euro area under the new forecast
8th November 2012
The 2012 Autumn Economic Forecast of the European Commission confirms the Spring Forecast expectation that several euro area countries, including France, will breach their commitment to return below a 3 percent deficit in 2013, unless they change their budget plans or the EU gives them more time to meet their commitment. However, most of these countries, including France, appear to be taking EU rules seriously as their structural balance figures have improved since the Spring Forecast. Read more
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Chart of the week: Funding costs are coming down
29th October 2012
At the end of July when sovereign yields of the troubled euro area economies were reaching a peak, we highlighted in a chart of the week the Emergency on funding costs for sovereigns, financial and non-financial corporations. The piece emphasized that: · Funding cost for financial and non-financial corporations are highly correlated with sovereign risk and have reached very high levels leading to a real fragmentation of the euro area · Top financial corporations were borrowing at higher rates than sovereigns and non-financial corporates · In Spain the market pressure over the sovereign risk was so high that the top 5 Spanish non-financial corporations were borrowing at lower interest rates than their sovereign, hinting at some decoupling of sovereign from… Read more
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Chart of the week: The real test of the euro
25th October 2012
The single most pressing threat to the integrity, and perhaps also to the existence, of the euro is the depth of the recession in southern European member states, and their bleak economic outlook, as I argued in a policy contribution we published last week. Figure 1 shows that following three decades of relatively stable GDP per capita compared to the USA, southern Europe is expected to fall behind quite dramatically. Figure 1: GDP per capita in major geographical regions of the EU (USA = 100), 1950-2017 Source: Figure 1 in Darvas, Zsolt (2012) ‘The euro crisis: ten roots, but fewer solutions’, Bruegel Policy Contribution 2012/17, October. Note: GDP is based on purchasing power parity dollars; median values are indicated for… Read more
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Chart of the week - Economic convergence in the euro area: on apprend de ses erreurs
24th October 2012
Economic commentators are rightly worried about the different activity developments between the “core” and the “ periphery” of Europe, with the former in acceptable conditions and the latter in recession. There are, however, other macroeconomic developments worth of notice, with a fairly different, and more positive, message. The charts below show on-going convergence towards balance of three important macro-economic indicators for Germany, Ireland, Portugal, Spain, Italy and even for Greece: current account balances, unit labour costs and fiscal deficits. Current accounts are moving towards balance, from below in the case of Greece, Spain, Italy and Portugal (Ireland is already moving into surplus) and from above in the case of Germany. Current account balance in selected euro area countries (% of… Read more
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Chart of the week: the ECB’s power on Spanish and Italian bond yields
10th October 2012
By how much can the ECB influence government bonds yields of Spain and Italy? The answer is ‘very significantly’, as the chart below shows. But the chart also shows that the impacts do not last for too long, as (at least up to July 2012) yields started to increase a few months after the various measures. 2-year and 10-year maturity government bond yields of Spain, Italy, and Germany, 2 January 2010 – 8 October 2012 Source: Datastream (yields) and ECB (dates); see the links to various announcements in the main text. While it is impossible to isolate the direct impact of ECB measures, because various other decisions and events also shape market reactions, the chart does indicate that several major… Read more