Euro Area : OECD Economic Surveys 2002.

186 Pages·3.354 MB·English

by  OECD

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Economic Surveys Non-Member Economies 6
Australia, August 2001 Baltic States, February 2000 Euro area
Austria, December 2001 Brazil, June 2001
Belgium, March 2001 Bulgaria, April 1999
Canada, September 2001 Romania, February 1998
Czech Republic, July 2001 Russian Federation, February 2002
Denmark, February 2002 Slovenia, May 1997
Euro area, September 2002
Finland, December 2001
ECONOMICS
France, November 2001
Germany, May 2001
Greece, July 2002
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Hungary, June 2002 E
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Portugal, April 2001

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Switzerland, May 2002 A
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Turkey, February 2001
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United Kingdom, December 2001 A
www.oecd.org
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ISSN 0376-6438 ISBN 92-64-19158-5 e
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© OECD, 2002.
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OECD
ECONOMIC
SURVEYS
2001-2002
Euro area
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and
which came into force on 30th September 1961, the Organisation for Economic Co-operation
and Development (OECD) shall promote policies designed:
– to achieve the highest sustainable economic growth and employment and a rising
standard of living in Member countries, while maintaining financial stability, and
thus to contribute to the development of the world economy;
– to contribute to sound economic expansion in Member as well as non-member
countries in the process of economic development; and
– to contribute to the expansion of world trade on a multilateral, non-discriminatory
basis in accordance with international obligations.
The original Member countries of the OECD are Austria, Belgium, Canada, Denmark,
France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United
States. The following countries became Members subsequently through accession at
the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969),
Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994),
theCzech Republic (21st December 1995), Hungary (7th May 1996), Poland
(22nd November 1996), Korea (12th December 1996) and the Slovak Republic
(14thDecember2000). The Commission of the European Communities takes part in
the work of the OECD (Article 13 of the OECD Convention).
Publié également en français.
© OECD 2002
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Table of contents
Assessment and recommendations 9
I. Macroeconomic developments and prospects 19
The slowdown was caused by both internal and external factors 20
The labour market is more resilient than in the past 26
Inflation has remained above the ECB’s price stability range 26
Near term prospects 34
II. The fiscal policy framework 39
A first stress test 39
The fiscal stance 44
Revisiting the fiscal framework 50
III. Monetary management 61
The record to date 61
Framework issues 62
The policy stance 65
Monetary policy and inflation differentials 69
IV. Policies to boost financial market integration 73
Introduction 73
Forces shaping financial market integration 74
The state of play 80
Facing the challenges: current policies and their implementation 97
Other unfinished business and priorities 108
V. The EU’s policy processes 115
Economic and legal underpinnings of the EU processes 116
The Broad Economic Policy Guidelines 120
Budgetary policy: the excessive deficit procedure 124
Product and capital market policy: the Cardiff process 129
Labour market policy: the Luxembourg process 132
Macroeconomic dialogue: the Cologne process 136
Scope for improving co-ordination 136
Notes 143
Glossary of acronyms 153
Bibliography 155
© OECD 2002
4 OECD Economic Surveys: Euro area
Annexes
I. General government balances in the stability and convergence programmes 167
II. Enlargement: an update 170
III. Capital market segmentation: an aggregate view 174
IV. The making of a common financial environment 177
V. Policy making in financial markets: the institutional framework 180
VI. Centralised processes: the single market and monetary policy 184
VII. A glossary of major EU institutions and bodies 186
(cid:127)(cid:127)(cid:127)(cid:127)(cid:127)
Boxes
1. Has structural unemployment declined? 28
2. The euro cash changeover: an early assessment 31
3. The latest batch of Stability Programmes – the Commission’s assessment 44
4. The benefits of efficient financial markets 75
5. The external trade regime is fairly liberal 77
6. The many views on supervision 105
7. Synopsis of recommendations 109
8. Varying degrees of co-ordination 117
9. The Lisbon 10-year strategy 121
10. The early warning that did not happen 129
11. Policy co-ordination mechanisms rarely exist in federations 139
Tables
1. The euro area and the United States: key indicators 20
2. Breaking down the change in structural unemployment 29
3. Outcomes and projections 35
4. Risks and uncertainties surrounding the projections 36
5. Euro area fiscal indicators 41
6. The latest batch of Stability Programmes: assessment by the Ecofin Council 42
7. Decomposing the fiscal stance 47
8. The fiscal stance across countries 48
9. Fiscal implications of ageing populations 56
10. Long-run sustainability of public finances: an assessment by the European
Commission 58
11. Monetary policy action since the start of2001 67
12. Bank lending channel: estimation results 70
13. Operating income per transaction 89
14. Recent changes in banking structure in the European Union
and the United States 92
15. Bank loans to the corporate sector in the euro area and the United States 92
16. Overview of individual measures in the Financial Services Action Plan 98
17. The advisory, regulatory and co-ordinating committees 102
18. Orientation of national supervisors 104
19. Classification of EU policies 118
20. Progress towards certain Lisbon goals and indicators of best performance
on employment 122
© OECD 2002
Table of contents 5
Annexes
A1. The four vintages of Stability and Convergence Programmes compared 168
A2. Accession negotiations: state of play 171
A3. Candidate countries: main statistical indicators 172
A4. Consumption and output growth correlations 175
Figures
1. Key indicators in an international perspective 21
2. Output growth 22
3. Contributions to GDP growth 23
4. Business and consumer confidence indicators 24
5. Monetary and fiscal easing 25
6. Employment and unemployment 27
7. Estimates of structural unemployment 29
8. Inflationary pressures 30
9. Inflation dispersion 33
10. Moving targets 40
11. Divergence from fiscal targets 46
12. Fiscal balances 49
13. Effectiveness of automatic stabilisers 54
14. Inflation performance since the launch of the euro 62
15. Credit and money growth 63
16. Interest rates 66
17. Exchange rate developments 68
18. Interest rate expectations 69
19. The EU’s current foreign trade regime in financial services 79
20. Convergence of short-term interest rates 81
21. Total monthly issuance of bonds denominated in euro 85
22. Spreads on government bonds 85
23. Debt issued by the corporate and financial sectors in the European Union
and the United States 86
24. Stock market capitalisation in the European Union and the United States 87
25. Key national mortgage interest rates 94
26. Status of the Financial Services Action Plan measures 99
27. Broad Economic Policy Guidelines 123
28. Stability and Convergence Programmes 126
29. General government balances: performance against Stability and Convergence
Programme targets 130
30. The Cardiff process 131
31. The Luxembourg process: employment guidelines 134
32. Labour market developments 135
Annex
A1. Saving and investment across the OECD and the euro area 176
© OECD 2002
BASIC STATISTICS
(2001)
LAND AND PEOPLE Euro area United States Japan
Area (thousand km2) 2495 9373 378
Population (million, in2000) 302.0 275.4 126.9
Number of inhabitants per km2 121 29 336
Population growth (1993-2000, annual average % rate) 0.2 0.9 0.3
Labour force (million) 140.0 141.8 67.5
Unemployment rate (%) 8.0 4.8 5.0
ACTIVITY
GDP (billion USD, current prices and exchange rates) 6087.5 10143.2 4146.8
Per capita GDP (USD, current prices and PPPs, in2000) 24273 35619 25968
In per cent of GDP:
Gross fixed capital formation 21.0 19.9 25.8
Exports of goods and services (in2000) 19.4 10.8 11.1
Imports of goods and services (in2000) 19.3 14.6 9.6
PUBLIC FINANCES (per cent of GDP)
General government: Revenue 43.8 30.9 29.8
Expenditure 45.1 30.4 36.9
Balance –1.3 0.5 –7.1
Gross public debt (end-year) 71.9 59.5 132.8
EXCHANGE RATE (national currency per euro)
Year average 0.90 108.7
Start of year 0.94 108.3
End of year 0.88 115.3
EURO AREA – EXTERNAL TRADE IN GOODS (main partners, % of total flows, in2000)
Exports Imports
United Kingdom 18.1 United States 14.5
United States 16.9 United Kingdom 14.4
Switzerland 6.0 Japan 7.1
Sweden 3.7 China 5.4
Japan 3.4 Switzerland 4.2
Poland 2.9 Sweden 3.5
SHARE IN EURO AREA GDP (current market prices)
35 35
30.3
30 30
25 25
21.5
20 20
17.9
15 15
10 9.5 10
6.2
5 3.8 3.1 5
2.0 1.9 1.8 1.7
0.3
0 0
DEU FRA ITA ESP NLD BEL AUT FIN GRC PRT IRL LUX
Note: An international comparison of certain basic statistics is given in an annex table.
This Survey is published on the responsibility of the Economic
and Development Review Committee of the OECD, which is charged
with the examination of the economic situation of Member countries.
(cid:127)
The economic situation and policies of the euro area were
reviewed by the Committee on 13May2002. The draft report was
then revised in the light of the discussion and given final approval as
the agreed report of the whole Committee on 30July2002.
(cid:127)
The Secretariat’s draft report was prepared for the Committee
by Paul van den Noord, LaurenceBoone and CarlGjersem
under the supervision of Peter Hoeller.
(cid:127)
The previous Survey of the euro area was issued in
May2001.
Assessment and recommendations
Growth Output in the euro area has recently been recovering
is recovering from the2000-01 slowdown. Growth had decelerated pro-
from its marked gressively from its peak in the first half of2000, and turned
slowdown negative in the fourth quarter of2001. The slowdown was
in2000-01 prompted by a series of shocks, most of them common to
the OECD area. Aside from the 11September events, these
included the surge in oil prices in1999-2000, the bursting of
the ICT bubble and the ensuing slump in stock markets. The
sharp downturn in foreign demand aggravated the situation.
As a result, economic growth declined from 3½per cent
in2000 to 1½per cent in2001, although the policy easing
during the year cushioned the downturn to some extent.
The labour market Job creation has remained remarkably resilient to date.
has shown After expanding by 2¼per cent in2000, employment still
remarkable grew by 1½per cent in2001, thus extending the favourable
resilience trend that started in the mid-1990s. Helped by modest
increases in wages, the employment content of growth in
the euro area has been exceptionally high in recent years,
the counterpart being sluggish gains in labour productivity,
particularly in comparison with the United States. The
unemployment rate has fallen markedly, from its 11per cent
peak in1996-97to 8per cent in the first half of2001, but has
edged up since. Meanwhile, structural unemployment has
declined slowly.
Inflation has Despite moderate wage developments, inflation, as
remained above measured by the harmonised index of consumer prices
target (HICP), has overshot the upper bound (2 per cent) of the
European Central Bank’s (ECB) price stability range since
early 2000. This is partly due to a series of adverse price
shocks; in 2000 oil prices soared and imports became
© OECD 2002