1 1 Kryzys fiskalny w Europie Kryzys fiskalny w Europie – – Strategie wyj Strategie wyj ś ś cia cia Mark Allen Mark Allen sta sta ł ł y przedstawiciel MFW na Europ y przedstawiciel MFW na Europ ę ę Centraln Centraln ą ą i Wschodni i Wschodni ą ą 110 110 s s eminarium eminarium BRE BRE - - CASE CASE Wars Wars z z aw aw a a , , 30 30 wrze wrze ś ś nia nia 20 20 10 10
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Kryzys fiskalny w Europie – Strategie wyjścia · 1 Kryzys fiskalny w Europie – Strategie wyjścia Mark Allen stały przedstawiciel MFW na EuropęCentralną i Wschodnią 110 seminarium
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Kryzys fiskalny w EuropieKryzys fiskalny w Europie–– Strategie wyjStrategie wyjśściacia
Mark AllenMark Allenstastałły przedstawiciel MFW na Europy przedstawiciel MFW na Europęę CentralnCentralnąą
Fiscal Space Ostry, Ghosh, Kim and Qureshi SPN/10/11 (September 1, 2010)
Default in Today’s Advanced Economies: Unnecessary, Undesirable, and Unlikely Cottarelli, Forni, Gottschalk and Mauro SPN/10/12 (September 1, 2010)
Growth of debt has been very rapid Debt to GDP ratio
0 50 100 150 200 250
Austria Belgium Canada France
Germany Greece Ireland
Italy Japan
Netherlands Portugal
Spain Sweden
UK USA
2007 2009 2015
Recession, not stimulus, is to blame. G-20 Advanced Economies: Increase in Public Debt, 2008-15 (Total increase: 39.1 percentage points of GDP; 2009 PPP weighted GDP)
Revenue loss 19.2
Fiscal stimulus 4.5
Financial sector support
3.2
Lending operations
4.0
2010-2015 Interest-growth
dynamics 0.7
2008-2009 Interest-growth
dynamics 7.5
Sour
ce: W
orld
Eco
nom
ic O
utlo
ok, A
pril
2010
; Sta
ff e
stim
ates
Adjustment of primary balances starts in earnest in 2011
-3 -2 -1 0 1 2 3
Denmark
Germany
Sweden
Austria
Canada
USA
Netherlands
France
Italy
Japan
Belgium
UK
Ireland
Portugal
Spain
CAPB PB overall
0 1 2 3 4
Austria
Germany
Denmark
Japan
Sweden
Belgium
Italy
USA
Canada
France
Portugal
UK
Netherlands
Ireland
Spain
2009-2010 change 2010-2011 change
6.3
Some definitions
Debt limit Point at which debt dynamics become
unstable without exceptional fiscal effort
Fiscal space Room to borrow before hitting debt limit
Paper makes definitions operational and estimates
fiscal space in advanced economies
Simple dynamics of the debt limit Determination of Debt Limit
pb, (r-g)d
Debt/GDP d* d ~
Primary balance reaction function
Interest rate schedule with endogenous risk premium and default probability, p
d ˆ d _
(r(p)-g)d (r(0)-g)d
Conditionally stable long-run debt ratio
Debt limit (given cty’s historical
reaction function)
Reaction function looks plausible Primary Balance and lagged Debt to GDP
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140
1st quartile
3rd quartile
Median
Lagged debt to GDP
Prim
ary
Bala
nce
to G
DP
Elements in the regression Dependent variable General government primary balance to
(2007), Denmark (1986), Finland (2000), Greece (1995), Ireland (1989), Israel (1983), Italy (1993), Japan (1990), Portugal (1985), Sweden (1987), Sweden (2000), United Kingdom (2000)
Emerging Economies (26)
Episodes of large fiscal adjustment
-2 0 2 4 6 8
10 12 14 16 18 20 Expenditure reduction
Revenue Increase
Size of adjustment
Large fiscal adjustment experiences
11
7 7 7 4 6 3 15 14 4 7 12 8 4
Length (years)
Primary balance surpluses in large fiscal adjustments Large fiscal adjustment experiences
Ireland (1989)
Sweden (2000)
Finland (2000)
Sweden (1987)
Denmark (1986) Greece (1995)
Israel (1983)
Belgium (1998)
Canada (1999)
UK (2000) Japan (1990)
Italy (1993)
Portugal (1985)
-1
0
1
2
3
4
5
6
7
8
0 1 2 3 4 5 6 7 8 CAPB at End-Year
CA
PB a
vera
ge o
ver f
ive
year
s af
ter e
nd o
f th
e ad
just
men
t
How high debt ratios were reduced
-30
0
30
60
90
120
150
180 Residual G-I Primary Surplus Ending Debt Ratio Starting Debt Ratio
Interest-growth differential below past default episodes
-10
-5
0
5
10
15
20
25
30 Real growth rate (inverted scale) Real interest rate Real interest - Real growth
Real interest and real growth rates (2011-2012 or two years prior to default average)
60.7
Maturities longer than in past defaults
0
10
20
30
40
50
60
70
80
90
100
Advanced economies (2009)
Emerging economies (2005) Default cases
20,6 20,2
36,2
Share of short-term debt
The average maturity of Government debt gives countries time to adjust