20140318-NATIXIS-Peripheral_countries__A_scorecard_after_six_years_of_crisis_17页_460kb

FLASH ECONOMICS: Peripheral Countries After Six Years of Crisis

Core Content

This document provides an economic analysis of the peripheral euro-zone countries (Portugal, Ireland, Greece, Spain, and Italy) six years after the 2008 financial crisis. It evaluates their macroeconomic performance, structural changes, and recovery efforts, focusing on the impact of austerity, competitiveness, and debt reduction.

Main Macro-Economic Imbalances at the Onset of the Crisis

• All five countries entered the crisis with significant macroeconomic imbalances, particularly in private and external debt.
• Greece had the highest public debt (112.9% of GDP) and private debt (118.4% of GDP) in 2008.
• Ireland had the lowest public debt (44.2% of GDP) but the highest private debt (292.8% of GDP).
• Spain had a high current-account deficit (10% of GDP) but manageable public debt (40.2% of GDP).
• Portugal had high private debt (240.7% of GDP) and external debt (103.7% of GDP), but public debt was relatively low (71.7% of GDP).
• Italy had the lowest private debt among the peripheral countries (128.7% of GDP), but its public debt (106.4% of GDP) was still significant.

Key Adjustments and Recovery Efforts

1. Fiscal Deficit Reduction

• All countries reduced their fiscal deficits, with Italy being the only one below the Maastricht 3% threshold.
• Greece saw a sharp reduction from 15.7% to 4.8% of GDP.
• Fiscal austerity led to a contraction in domestic demand, which in turn reduced imports and helped correct current-account deficits.

2. Competitiveness Gains

• A fall in unit labour costs (ULC) improved corporate margins and competitiveness.
• Greece had the largest ULC decline (17%) due to wage cuts, though productivity fell.
• Spain and Ireland improved competitiveness mainly through productivity gains.
• Portugal experienced a slight increase in wages but some productivity improvements.
• Italy saw an increase in ULC due to a drop in productivity and wage rises.

3. Deleveraging

• Household deleveraging occurred in Spain, Ireland, and Portugal, with Ireland having the highest private debt (214% of GDP).
• Corporate deleveraging was also underway, though Portugal was an exception.
• Despite reductions, private debt remained high across the region.

Trade and Current-Account Recovery

• Exports rose in all countries due to competitiveness gains, helping to correct current-account deficits.
• Greece still had a current-account deficit in 2013, while others saw improvements.
• Ireland had the best export performance, though not yet back to 2008 levels.
• Spain was the only country to gain export market share globally.

Structural Changes in the Economy

• Industrial production fell sharply across all peripheral countries, with Greece and Spain experiencing the largest declines.
• Ireland was the only country to recover to 2008 levels in industrial production.
• There was a shift in the technological content of production, with a decline in medium-low and medium-high technology sectors and a move toward lower or higher technology production in most countries.
• Portugal and Spain showed a significant decline in high-technology manufacturing.

Z-Score Analysis

• A z-score ranking was developed based on four criteria: overall economic situation, supply situation, external position, and public finances.
• Ireland had the highest z-score (17.5), reflecting better economic fundamentals and external position.
• Greece had the lowest z-score (0.0), highlighting its severe economic weaknesses.
• Spain (15.2) and Italy (11.5) showed moderate recovery, though both faced challenges in public finances and competitiveness.
• Portugal (12.4) had a relatively stable overall situation but struggled with public finances.

Economic Fundamentals and Outlook

• GDP growth remained weak across all countries, with an average decline of 10.5% from 2008 to 2013.
• Inflation was low or negative in most countries, with Greece posting negative inflation since 2013.
• Unemployment was high, especially in Greece and Spain, though it had started to decline in 2013.
• Public debt continued to rise, though expected to stabilize by 2014–2016 in some countries.
• Productive investment remained low, contributing to the decline in production capacity.

Summary of Economic Trends

Country	GDP Change (2008–2013)	Inflation (2013)	Unemployment (2013)	Industrial Production Change	Productive Investment Change	ULC Change	Current-Account Balance (2013)	Public Debt (2013)	10-Year Interest Rate (2013)
Portugal	-7.1%	0.5%	15.5%	-15.4%	-31.2%	1.3%	0.9%	130.7%	6.2%
Ireland	-6.6%	0.5%	12.8%	-0.3%	-38.5%	-8.7%	2.3%	125.3%	3.4%
Greece	-22.5%	-0.8%	27.6%	-29.1%	-44.1%	-4.1%	-1.0%	168.2%	8.5%
Spain	-7.4%	1.7%	26.5%	-28.4%	-29.5%	-5.5%	1.4%	93.0%	4.1%
Italy	-9.1%	1.3%	12.3%	-24.1%	-27.0%	10.0%	0.0%	133.1%	4.1%

Conclusion

The peripheral countries have made progress in reducing fiscal deficits and improving competitiveness through lower unit labour costs. However, this has come at the cost of declining domestic demand, high unemployment, and reduced production capacity. While foreign trade has been a growth driver, productive investment remains stagnant, and public debt continues to rise. The z-score analysis highlights Ireland's relative strength and Greece's persistent vulnerabilities. A full recovery will require sustained productive investment and economic restructuring.