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The Euro Area: Emerging From The Crisis
The Euro Area: Emerging From The Crisis
www.euro-challenge.org
These are all indicators They help to explain your teams season Will your team go to the Superbowl?
When the economy is growing, GDP growth is a positive number In a recession, GDP growth is negative (GDP shrinks)
0
2006 2007 2008 2009 2010 2011 2012
-1 -2 -3 -4 -5
United States
Source: OECD, IMF 5
10
United States
Source: Eurostat, IMF 6
2 1.5 1 0.5 0 -0.5 -1 2004 2005 2006 2007 2008 2009 2010
United States
Source: Eurostat, IMF 7
The euro area: core and periphery countries Core countries: Germany, France, Netherlands, Austria, etc. Periphery countries: Portugal, Ireland, Greece, Spain
Source: IMF
Several euro area countries confronted by need to: adopt drastic austerity measures accelerate reforms
Stimulus vs. austerity debate: should governments use fiscal stimulus to support economy? or cut back deficits and bring down the debt level?
Increase competition
Economic reform program developed at EU level Each country adopts own measures Aims to spur more knowledgeintensive, innovation-based growth Raise employment rate to 75% R&D spending should be 3% Prepare for longer-term challenges: aging, globalization An agenda for growth and jobs
Deficit and debt levels rose sharply due to the crisis But already too high in several countries Countries now facing much higher borrowing costs Greece and Ireland forced to seek assistance Too high a debt level reduces economic growth
Aging Population
There are currently four people of working age for every retired person By 2050 there will be only two people of working age for every retired person As populations age, economic growth slows, tax revenue falls (fewer workers) Increased age-related spending on healthcare, pensions Crisis makes it even more urgent to have low debt levels
high
unemployment benefits
low
weak
employment protection
strong
Marie-Claude designed 5 web sites Karl-Heinz designed 8 web sites Who is more productive?
26
Marie-Claude designed 5 web sites Karl-Heinz designed 8 web sites Who is more productive? Marie-Claude worked 200 hours Karl-Heinz worked 400 hours Now who is more productive?
27
Slow growth