04a_emerging_from_the_crisis
.pdf
MANAGEMENT
Applied Summer School
Business in Europe
Challenges and Strategy –
The Euro Area: Emerging from the Crisis
Prof. Vito Bobek
University of Apllied Sciences FH Joanneum
vito.bobek@fh-joanneum.at
MANAGEMENT
The current economic situation in the euro area
MANAGEMENT
GDP growth: deep recession, fragile recovery
GDP growth: deep recession, fragile recovery
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4 |
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3 |
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2 |
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1 |
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% |
0 |
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2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
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-1 |
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-2 |
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-3 |
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-4 |
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-5 |
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Euro area (16 countries) 
United States
Source: OECD, IMF |
3 |
MANAGEMENT
Unemployment: stable, but still too high
Unemployment: stable, but still too high
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12 |
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10 |
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8 |
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% |
6 |
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4 |
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2 |
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0 |
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2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
Euro area (16 countries) 
United States
Source: Eurostat, IMF |
4 |
MANAGEMENT
Inflation: if anything, too low?
Inflation: if anything, too low?
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4.5 |
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4 |
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3.5 |
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3 |
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2.5 |
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% |
2 |
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1.5 |
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1 |
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0.5 |
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0 |
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-0.5 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
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-1 |
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Euro area (16 countries) 
United States
Source: Eurostat, IMF |
5 |
MANAGEMENT
The European sovereign debt crisis
MANAGEMENT
The euro area: core and periphery countries
Core countries: Germany, France, |
Periphery countries: Portugal, |
Netherlands, Austria, etc. |
Ireland, Greece, Spain |
MANAGEMENT
Monetary policy: one size fits all
Real GDP growth rate %
15 |
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10 |
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5 |
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Germany |
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Ireland |
0 |
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1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
-5 |
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-10 |
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Source: IMF
MANAGEMENT
The origins of the Greek crisis
Greece’s euro membership marked by consumption, investment booms
Wages rise faster than productivity, competitiveness deteriorates
Low interest rates fuel credit growth
Poor fiscal discipline and weak institutions
Large revisions to budgetary statistics
Unsustainable pension, health systems
MANAGEMENT
Greece and the EU rise to the challenge
May 2010: Greece adopts €110bn program supported by the EU and IMF
Program aims to restore sustainable public finances and recover lost competitiveness
Far-reaching structural reforms being adopted (e.g. landmark pension reform)
Drastic cuts in public expenditure across all levels of government
Program will stabilize debt ratio (but at a high level)