H.-W. Sinn

European Law and Life Culture

第四單元： The European Competitveness Crisis

Lecturer: Hans-Werner Sinn, Ifo Institute for Economic Research

Unless noted, the course materials are licensed under Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Taiwan (CC BY-NC-SA 3.0)

1

H.-W. Sinn

Bail-out measures

Unemployment and growth

Loss of competitiveness

Development of trade balances

Necessary and actual devaluation

H.-W. Sinn

Unemployment and growth

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-4.8

-2.6-2.1 -1.9

-0.8 -0.8 -0.2

0.1 0.2 0.4 0.6 0.7 0.81.4 1.6

-06

-04

-02

-6

-4

-2

0

2

4

EU15 -0.3%

%

Source: Forecast by the Ifo Institute, June 2013.

Real GDP in the EU15 countriesEconomic growth 2013

H.-W. Sinn

2

6

10

14

18

22

26

%

Quelle: Eurostat, August 2013.

Unemployment rates in Europe

Spain Greece

IrelandGermany

Portugal

Italy

France

20122001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2013

H.-W. Sinn

2

6

10

14

18

22

26

%

Quelle: Eurostat, August 2013.

Unemployment rates in Europe

20122001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2013

Germany

Taiwan

ChinaChina

IndonesiaJapanJapan

H.-W. Sinn

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Germany

Ireland

Spain

France

Italy CyprusPortugal

Greece

%

JapanJapan

Youth unemployment(< 25 years)

Source: Eurostat.

H.-W. Sinn

Loss of competitiveness

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75

80

85

90

95

100

105

110

115

120

125

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Germany

Greece

Portugal

Italy

Public and private consumption% of NNI

11

Source: Eurostat

H.-W. Sinn

Development of trade balances

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-300

-200

-100

0

100

200

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11Source: Eurostat, Datastream.

Current account balancesBillion euros

Germany

GIPSIC

12Source: Eurostat, September 2013.

The eurotango!

H.-W. Sinn

Are we already on the right

track?

H.-W. Sinn

40000

50000

60000

70000

80000

90000

100000

110000

120000

130000 Mill. euros

Imports

Exports

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Spain

2013

Source: Eurostat

H.-W. Sinn

6000

10000

14000

18000

22000

26000

Import

Export

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

billion eurosGreece

2013

Sourcle: Eurostat

H.-W. Sinn

Necessary and actual devaluation

H.-W. Sinn

108Slovenia82Slovakia

67Greece56Spain

51Cyprus47Portugal47Ireland

40Italy39Luxembourg

37Netherlands26Eurozone25Belgium25France

22Finland17Austria

9Germany

Price development 1996-2008%

0 20 40 60 80 100Source: Eurostat, calculations by the Ifo Institute. May 2013

Trade-weighted appreciationvis-à-vis othereuro countries:

GIPSIC: + 30%

Germany: - 22%

H.-W. Sinn

How much realignment has taken place and how much

is necessary?

H.-W. Sinn

Greece is 61% more

expensive than Turkey,

Portugal is 43% more

expensive.Devaluation required: 38% and 30%

respectively

H.-W. Sinn

60

80

100

120

140

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

GreeceItalyIreland

Portugal

Spain

France

Germany

Q3/2008=100

Real exchange rates (GDP deflator relative to rest of euro area)

& necessary realignment after Goldman Sachs

Long run

target

Italy

Lehman

5,5% inflation?

71% price increase?

42% asset loss?

Why Ireland?

Source: Eurostat

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Bail-out measures

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Help from the printing press

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ECB collateral requirements

Date StandardUntil 24 October 2008 A- From 25 October 2008 BBB-

3 May 2010 – 7 July 2011 Rating requirement waived for government bonds of

Greece, Ireland and PortugalELA creditNon-traded ABS created by commercial banksCompany credit

The printing press was

underbidding the capital

market.

H.-W. Sinn

Billion euros

Finland, Germany,Luxembourg, and the Netherlands

(left-hand scale)

GIPSIC(right-hand scale)

Billion euros

Note: Germany, the Netherlands, Italy and Spain: end of May; other countries: end of April.

-200

0

+200

+400

+1200

+600

+1000

+800 -800

-400

-200

0

+200

-600

-1000

-1200

May 2013+808 bnMay 2013-717 bn

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Target balancesclaims and liabilities

Source: Eurostat

H.-W. Sinn

699

46

66

118

214

5841

1156

772

384

Target liabilities**(GIPSIC)

Purchases of GIPSIC governmentbonds by the central banksof the other euro countries*

Greece (euro countries, EFSF, IMF)

Ireland (EFSM, EFSF, IMF)Portugal (EFSM, EFSF, IMF)

Claims related to the under-proportionate

issuance of banknotes(June 2013)

(67%) ECB

(33%) ParliamentsSpain (ESM)

Lending funds to euro countries(Billion euros)

Paid-out to date

* Data updated: 27 September 2013** Data as of end of June April 2013 (Greece, Ireland, Portugal and Cyprus); Spain and Italy: end of August.

5Cyprus (ESM)

H.-W. Sinn

The EZB is predetermining

policy and curbing reform.

H.-W. Sinn

2. Target

The euro trap

3. Government bond purchasesby ECB

6. Banking union

4. EFSF/ESM

1. Credit bubble

5. OMT

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Three options

1. Deflation in the periphery

3. Exit

2. Inflation in the coreViolation of the central bank’s

mandate

Mass unemployment

Bank Run à la Cyprus

H.-W. Sinn

Potential international financial aid

Greece (185% of 2012 GDP)

Spain

Italy

358 bn. euro

4.838 bn. euro1.941 bn. euro

2.897 bn. euro

H.-W. Sinn

Conclusions1. Financial crisis is only the tip of the iceberg

4. The likelihood of exits by large countries is growing

2. Overpriced economies must devalue3. Germany must inflate

H.-W. Sinn

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1-35Wikimedia commons / Blurpeace, Sreejithk2000 http://commons.wikimedia.org/wiki/File:Ifo_logo.svg本作品屬公共領域之著作。瀏覽日期： 2013/10/04。

4Ifo institute依據著作權法第 46、 50、 50、 52、 65條合理使用。

5Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=une_rt_m&lang=en依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/10/04。

6Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=une_rt_m&lang=en依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/10/04。

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Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=une_rt_m&lang=en(age<25)依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/10/04。

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Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nama_fcs_k&lang=en(TIME:1995-2012)依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/11/07。

11Eurostathttp://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00038&plugin=1依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/10/05。

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Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=namq_exi_c&lang=en(TIME:2002Q1-2013Q2, , INDIC_NA: Exports of goods and services & Imports of goods and services, Spain)依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/11/07。

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Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=namq_exi_c&lang=en(TIME:2002Q1-2013Q2, , INDIC_NA: Exports of goods and services & Imports of goods and services, Greece)依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/11/07。

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Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=prc_hicp_midx96&lang=en(TIME:2008)依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/11/07。

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Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ert_eff_ic_q&lang=en(TIME:1995Q1-2013Q2)依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/11/07。

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Eurostathttp://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=bop_q_c&lang=en(Partner: Euro area, p.s. GIPSIC是 Greece, Ireland, Portugal, Cyprus, Spain and Italy)

依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/11/08。

24Ifo Institutehttp://www.cesifo-group.de/ifoHome/policy/Haftungspegel.html依據著作權法第 46、 50、 52、 65條合理使用。瀏覽日期： 2013/11/08。

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28Wikimedia commons / Lars Aronssonhttp://commons.wikimedia.org/wiki/File:La2-euro.jpg本作品以創用CC「相同方式分享」1.0版授權釋作。瀏覽日期： 2013/10/06。

28Wikimedia commons / unknownhttp://commons.wikimedia.org/wiki/File:AVA_Aandeel_1000_Gulden_1875.jpg本作品屬公共領域之著作。瀏覽日期： 2013/10/06。

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Hanser Verlag / Hans-Werner Sinn 著， 2012 ，《 Die Target-Falle – Gefahren für unser

Geld und unsere Kinder 》， Germany ： Hanser Verlag 。http://www.hanser-literaturverlage.de/buecher/buch.html?isbn=978-3-446-43353-3依據著作權法第 46 、 50 、 52 、 65 條合理使用。瀏覽日期： 2013/10/06 。