Presentation at the National Bank of Greece
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The document discusses the economic crisis and recovery in Spain from 2008-present. It describes the crisis response as initially focusing on fiscal stimulus but shifting in 2010 to structural adjustment through internal wage devaluation, labor market reforms, and fiscal devaluation. While this approach reduced macroeconomic imbalances, it also depressed domestic demand and income inequality grew. Long-term growth foundations remain weak due to issues like high debt, low investment, unemployment, and poverty. Bolder actions are needed to strengthen competitiveness and boost research, education, and social cohesion.
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Presentation at the National Bank of Greece
- 1. From crisis to development Athens, 29th of April 2014 José Moisés Martín Carretero
- 2. Not aimed at promoting growth but at facing macroeconomic imbalances in absence of monetary policy: ◦ Reduction of public deficit ◦ Internal wage devaluation: labour market reform ◦ Fiscal devaluation ◦ Financial reform and deleveraging ◦ Liberalization of markets Two phases: ◦ Between 2008 and 2010: Keynesian fiscal stimulus and automatic stabilizers ◦ Since 2010: structural adjustment
- 3. -150 -100 -50 0 50 100 150 200 250 300 350 BillionEuros Deleveraging process Gross Savings Gross investing Current Account Government Balance Leverage Deleverage
- 6. -10,0 -8,0 -6,0 -4,0 -2,0 0,0 2,0 4,0 6,0 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 Domestic Demand External Demand GDP
- 8. 0 5 10 15 20 25 30 15.000 16.000 17.000 18.000 19.000 20.000 21.000 Employment (thousands) (left axis) Unemployment rate (right axis)
- 9. 80 85 90 95 100 105 110 115 120 Index2005=100 Unit Labour Costs: nominal and real Nominal Real
- 17. 0 500000 1000000 1500000 2000000 2500000 3000000 3500000 Jan-aa Aug-aa Mar-aa Oct-aa May-aa Dec-aa Jul-aa Feb-aa Sep-aa Apr-aa Nov-aa Jun-aa Jan-aa Aug-aa Mar-aa Oct-aa May-aa Dec-aa Jul-aa Feb-aa Sep-aa MillionEuros Total debt (non financial sectors) -2,52%
- 18. 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 Mar-aa Oct-aa May-aa Dec-aa Jul-aa Feb-aa Sep-aa Apr-aa Nov-aa Jun-aa Jan-aa Aug-aa Mar-aa Oct-aa May-aa Dec-aa Jul-aa Millioneuros Bank loans to private sector and households -23%
- 20. 80.00 85.00 90.00 95.00 100.00 105.00 Jan-aa Nov-aa Sep-aa Jul-aa May-aa Mar-aa Jan-aa Nov-aa Sep-aa Jul-aa May-aa Mar-aa Jan-aa Nov-aa Sep-aa Jul-aa May-aa Index2006=100 Export prices competitiveness index (the higher, the worse) EU28 OECD No change
- 21. 0 20000000 40000000 60000000 80000000 100000000 120000000 140000000 2000DIC 2001JUN 2001DIC 2002JUN 2002DIC 2003JUN 2003DIC 2004JUN 2004DIC 2005JUN 2005DIC 2006JUN 2006DIC 2007JUN 2007DIC 2008JUN 2008DIC 2009JUN 2009DIC 2010JUN 2010DIC 2011JUN 2011DIC 2012JUN 2012DIC Eurothousands Evolution of current account balance Imports frozen
- 22. 1.5 1.6 1.7 1.8 1.9 2 2.1 2.2 Year 2000 Year 2001 Year 2002 Year 2003 Year 2004 Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 Year 2010 Year 2011 Year 2012 Year 2013 %oftotalworldtradeongoodsFOB Spanish Exports as share of world trade
- 23. Imports as % of national demand %ofnationaldemand
- 30. Capital and investment Innovation Human Capital Total factor productivity
- 33. 0 5 10 15 20 25 %RateofUnemployment NAWRU (non accelerating wage rate of unemployment)
- 34. 10 12 14 16 18 20 22 24 %ofpeople15-29yearsold Young People not in employment nor any education and training European Union (28 countries) Spain
- 36. -001% 000% 001% 001% 002% 002% 003% 003% 004% Average 2000-2007Average 2008-2012Average 2013-2016Average 2017-2021 Annual potential growth average
- 37. Europe 2020 Target Last data Employment rate 75% 59,3% R+D Investment 2% of GDP 1,3% of GDP Greenhouse emissions -20% from 1990 +21% from 1990 Renewable energy 20% of total energy 16,05% Energy efficiency 20% - School early leaving 10% 24,9% 30-34 years old with tertiary qualifications 44% 40,6% Poverty and social exclussion -1,5 million people in poverty. growing
- 38. Internal devaluation has led to a wage reduction and worsening income distribution. Internal demand has been strongly depressed. In spite of efforts, Public deficit and debt still being far away from Stability Pact target. Deleveraging of economy is being too slow due to the low inflation. International competitiveness gain is almost purely cyclical. Decrease of household disponsable income, and higher inequality of income, led to an increase of poverty and social exclusion.
- 39. Due to those reasons, foundations for long- term growth are weak: ◦ Financial impediments for a higher level of investment. ◦ Lack of investment in R+D ◦ Long term unemployment to become structural. ◦ “Lost generation” of young people ◦ Weak social cohesion and political mistrust.
- 40. Conditions to increase growth and social development: ◦ ECB should act more agressively in order to tackle low inflation, euro appreciation and debt burden: QE. ◦ Growth friendly tax reform. ◦ Public expenditure to be focused on child poverty. ◦ Increase the quantity and effectiveness of R+D investment. Reform of universities. ◦ Bold policies towards qualification of not-qualified workers and unemployed. ◦ Bring people back to the employment as soon as possible. Specially those in long term unemployment.