Download Laura Bardone

Italy and Spain – stocktaking of
reforms and challenges ahead
Laura Bardone
DG Economic and Financial Affairs, European Commission
Italy – Spain:
Structural Reforms: dynamic growth impact and policy
challenges
Bruegel, Brussels, 2 November 2015
Outline of presentation
o Entering the crisis: similarities and differences
o 7 years later: the extent of adjustment
o Taking stock of reforms
o The challenges ahead
2
Entering the crisis: similarities and
differences
Italy
Spain
- High public debt, low
private debt
- Low public debt, high private
debt on the back of property
boom
- Stagnant productivity
growth & subdued economic
activity
- Low productivity growth but
sustained real GDP growth…
- Some job creation but
participation & employment
rates remain low; duality
increased
- … driven by strong job
creation in non-tradeable
sector; duality increased.
3
7 years later: diverging growth developments
Real GDP growth
2007=100
105
100
95
90
85
80
75
00
Source: Ameco, own calculations
01
02
03
04
05
ES
06
07
IT
08
09
10
EA19
11
12
13
14
15
4
7 years later: investment has plunged
Gross fixed capital formation (GFCF)
2007=100
110
% of GDP
110
Total
105
105
100
100
95
95
90
90
85
85
80
80
75
75
70
70
65
65
60
Excluding dwellings
60
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
ES
IT
EA19
Source: Ameco, own calculations
DE
FR
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
ES
IT
EA19
DE
FR
7 years later: Spain regains cost
competitiveness faster
2.0
2010-2015, annualised rate
of change
ES
IT
EA19
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
Core inflation
Source: Ameco, own calculations
Compensation per employee
Labour productivity
Nominal unit labour costs
6
7 years later: high debt is a source of
vulnerability for the economy…
Loans and debt securities, non-financial corporations, households, general government
% of GDP
300
250
200
150
100
50
0
1998
2007
2014
1998
Italy
2007
2014
Spain
NFC
HH
GG
7
Source: Eurostat, financial accounts
Taking stock of reforms: labour market
reforms relax EPL
Permanent workers
Temporary workers
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
IT
0.5
ES
IT
ES
0.0
0.0
2009
2010
2011
2012
2013
2014
2015
2009
2010
2011
2012
2013
2014
2015
Source: OECD; for Italy, own estimation for 2014 and 2015
8
Taking stock of reforms: significant
improvements in PMR
Italy
Spain
OECD average
2.4
2.2
2.0
1.8
1.6
1.4
1.2
1.0
1998
2008
2013
Source: OECD
9
The challenges ahead: need to correct
the large stock of imbalances
General government debt and net international investment position, 2014
GG Debt, % of GDP
180
EL
140
IT
PT
CY
IE
BE
100
FR
ES
AT
SI
60
DE
NE
MT
FI
SK
LV
20
-150
LT
LU
-125
-100
Source: Eurostat, own calculations
-75
-50
-25
NIIP, % of GDP
0
25
50
75
The challenges ahead: completing the fiscal
adjustment
General government net lending/borrowing and discretionary fiscal effort (dfe)
% of GDP
4
2
0
-2
-4
-6
-8
-10
-12
00
01
02
03
04
05
06
ES deficit
Source: Ameco, own calculations
07
08
IT deficit
09
IT dfe
10
ES dfe
11
12
13
14
15
16
The challenges ahead: addressing the high
share of NPLs
Impaired loans
12
The challenges ahead: improving
competitiveness
Italy
Institutions
7
Spain
Innovation
6
Infrastructure
5
4
Business sophistication
Health and primary
education
3
2
1
0
Higher education and
training
Market size
Technological readiness
Goods market efficiency
Financial market
development
Labor market efficiency
13
Source: 2015 World competitiveness report
The challenges ahead: addressing labour
market distress
Unemployment rate and underemployment of the 25-74 age class
% of labour force
Unemployment rate
Underemployment
35
30
25
20
15
10
5
0
2008
2014
ES
2008
2014
IT
2008
2014
EA19
14
Source: Eurostat, own calculations
The challenges ahead: improving human
capital
%
50
40
Tertiary educational attainment
age group 30-34
Literary proficiency
35
Difference in average literacy proficiency
between 45-54 and 16-24 age group
45
40
35
30
25
20
15
10
5
Korea
30
25
France
20
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
ES
IT
EA19
DE
Estonia
Netherlands
Czech Republic
Germany
Spain
Italy
15
10
5
Austria
Ireland
United States
OECD Average
Denmark
Australia
Canada
Sweden
Slovak Republic
0
Finland
Japan
Norway
-5
0
Poland
UK
-10
245
255
265
275
285
295
FR
Average literacy proficiency among 16-65 year old
Source: Eurostat, own calculations
Source: OECD, own calculations
15