PARIS EUROPLACE INTERNATIONAL FINANCIAL FORUM François Villeroy de Galhau Governor of the Banque de France Tokyo, 5 December 2016
Economic recovery in the euro area Real GDP (2008Q1 = 100) 110 110 Last data: Q3 2016 105 105 100 100 95 95 90 90 Euro area 85 85 France Germany 80 80 Italy 75 75 Spain 70 70 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Eurostat 2
Oil prices exert deflationary pressures Harmonised index of consumer prices (HICP) in the euro area and oil prices 1,2% €90 €80 0,8% €70 €60 0,4% €50 €40 0,0% €30 €20 -0,4% €10 Last data: nov. 2016 -0,8% €0 Jan 2014 Jan 2015 Jan 2016 Jan 2017 headline inflation, euro area (left-hand scale) core inflation (excluding food and energy), euro area (left-hand scale) price per barrel of oil (euros, right-hand scale) Source: Eurostat /Bloomberg 3
Accommodative monetary policy stance in the euro area % % 5 35 10 March monetary policy decisions: 30 4 Cut in interest rates ; TLTRO 2 : banks can 25 3 borrow at favourable rates conditional on 20 2 their lending to the 15 economy; Asset purchase 1 10 programme : +20 bn 0,00 EUR per month (total 0 5 80 bn) and corporate -0,40 bonds now eligible; -1 0 Forward guidance : 2008 2009 2010 2011 2012 2013 2014 2015 2016 interest rates to remain at present or lower ECB assets/GDP (right-hand scale) levels well beyond Interest rate on main refinancing operations March 2017. Interest rate on the deposit facility Interbank overnight rate (EONIA) 4
Rebalancing of unit labour costs Unit labour costs (ULC) : average annual percentage change 6,0 6,0 BMPE June 2016 Forecast 5,0 5,0 4,0 4,0 3,0 3,0 2,0 2,0 1,0 1,0 0,0 0,0 -1,0 -1,0 -2,0 -2,0 ZE FR DE IT ES ZE FR DE IT ES ZE FR* DE IT ES ZE FR* DE IT ES 1999-2007 2007-2009 2009-2014 2014-2017 * Series corrected for the CICE (tax credit); Sources: BMPE June 2016 (confidential); Banque de France calculations 5
The investment crunch as a % of GDP 25 24 23 22 21 20 19 18 17 Euro area Investment 16 Euro area Savings 15 1999 2001 2003 2005 2007 2009 2011 2013 2015 6
Financial levers: Europe is lagging behind NFC liabilities: net equity capital and financial debt as a % of GDP 180 Innovative investments 160 45 140 67 120 70 71 100 New financing 80 125 60 88 40 70 67 Equity capital 20 needs 0 France Euro area United United States (excl. Kingdom Germany) equity debt Source: Banque de France; data as of end June 2016 7
Three steps towards economic union A “Financing and Investment Union” • Capital Markets Union + Juncker Plan + Banking Union • Better channel abundant European savings (current account surplus of EUR 350 bn / year) towards productive investment across borders A collective economic strategy • Combine more structural reforms (France, Italy) and more fiscal support (Germany) • An institution fostering confidence: the euro area Finance Minister In the longer term, a European fiscal capacity • A euro area stabilisation tool: unemployment insurance scheme • A means to finance certain « European public goods » • The ability to issue common debt and even raise taxes 8
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