From crisis to developmentAthens, 29th of April 2014José Moisés Martín Carretero

Not aimed at promoting growth but at facing macroeconomic imbalances in absence of monetary policy:◦ Reduction of public deficit◦ Internal wage devaluation: labour market reform◦ Fiscal devaluation◦ Financial reform and deleveraging◦ Liberalization of markets

Two phases:◦ Between 2008 and 2010: Keynesian fiscal stimulus and

automatic stabilizers◦ Since 2010: structural adjustment

Leverage

Deleverage

Gross private savings

-10,0 -8,0 -6,0 -4,0 -2,0 0,0 2,0 4,0 6,0

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

2012

Q2

2012

Q3

2012

Q4

2013

Q1

Domestic Demand External Demand GDP

0

5

10

15

20

25

30

15.000

16.000

17.000

18.000

19.000

20.000

21.000

Employment (thousands) (left axis)

Unemployment rate (right axis)

-8,2%

-2,52%

-23%

Competitiveness

worsening

No change

Imports increasedImports frozen

Imports as % of national demand

Capital and investment Innovation Human Capital Total factor productivity

Europe 2020 Target Last data

Employment rate 75% 59,3%

R+D Investment 3% of GDP 1,3% of GDP

Greenhouse emissions

-20% from 1990 +21% from 1990

Renewable energy 20% of total energy 16,05%

Energy efficiency 20% -

School early leaving 10% 24,9%

30-34 years old with tertiary qualifications

40% 40,6%

Poverty and social exclussion

-1,5 million people in poverty.

growing

Internal devaluation has led to a wage reduction and worsening income distribution. Internal demand has been strongly depressed.

In spite of efforts, Public deficit and debt still being far away from Stability Pact target.

Deleveraging of economy is being too slow due to the low inflation.

International competitiveness gain is almost purely cyclical.

Decrease of household disponsable income, and higher inequality of income, led to an increase of poverty and social exclusion.

Due to those reasons, foundations for long-term growth are weak:

◦ Financial impediments for a higher level of investment.

◦ Lack of investment in R+D◦ Long term unemployment to become structural. ◦ “Lost generation” of young people ◦ Weak social cohesion and political mistrust.

Conditions to increase growth and social development: ◦ ECB should act more agressively in order to tackle low

inflation, euro appreciation and debt burden: QE.◦ Growth friendly tax reform.◦ Public expenditure to be focused on child poverty.◦ Increase the quantity and effectiveness of R+D

investment. Reform of universities.◦ Bold policies towards qualification of not-qualified

workers and unemployed. ◦ Bring people back to the employment as soon as

possible. Specially those in long term unemployment.