QE and the euro area recovery Patrick Honohan Slides for GIC Meeting, Helsinki, June 2016
Outline • Central Bank easing in the euro area – macro background • Techniques employed before QE • Nature and impact of the 2015 QE • Differential recovery of EA member states • What else could be done by ECB if needed?
Euro area GDP growth and sentiment indicators
Source: ECB
Source:Â ECB
Source: ECB, March 2016
2006Sep 2007Feb 2007Jul 2007Dec 2008May 2008Oct 2009Mar 2009Aug 2010Jan 2010Jun 2010Nov 2011Apr 2011Sep 2012Feb 2012Jul 2012Dec 2013May 2013Oct 2014Mar 2014Aug 2015Jan 2015Jun 2015Nov
Eonia rate (overnight money market) 5 4.5 4 3.5 3 % 2.5 2 1.5 1 0.5 0 ‐0.5
Source: ECB
Long‐term government bond yields: Selected euro area countries 1994‐2016 16 14 12 10
Finland
6
France
4
Ireland
0 1994Feb 1995Apr 1996Jun 1997Aug 1998Oct 1999Dec 2001Feb 2002Apr 2003Jun 2004Aug 2005Oct 2006Dec 2008Feb 2009Apr 2010Jun 2011Aug 2012Oct 2013Dec 2015Feb 2016Apr
Spain
8
2
Source: ECB
Germany
Italy Portugal
2007Jul 2007Dec 2008May 2008Oct 2009Mar 2009Aug 2010Jan 2010Jun 2010Nov 2011Apr 2011Sep 2012Feb 2012Jul 2012Dec 2013May 2013Oct 2014Mar 2014Aug 2015Jan 2015Jun 2015Nov 2016Apr
Long‐term government bond yields: Selected euro area countries 2007‐2016 8
7
6
5
1
0
Source: ECB
Spain
4 Italy
3 France
2 Finland
Germany
GDP projections vs outcome Euro area crisis countries
115 110 105 100 95 90 85 80 2010
2011
2012
2013
2014
2015
Greece prog
Ireland prog
Portugal prog
Cyprus prog
Greece latest
Ireland latest
Portugal latest
Cyprus latest
Source: based on IMF reports to 2014
GDP projections vs outcome Euro area crisis countries
115 110 105 100 95 90 85 80 2010 Greece prog Source: based on IMF reports to 2014
2011
2012
Ireland prog
2013 Greece latest
2014
2015
Ireland latest
GDP projections vs outcome Euro area crisis countries
115 110 105 100 95 90 85 80 2010 Source: based on IMF reports to 2014
2011
2012
2013
2014
Ireland prog
Portugal prog
Ireland latest
Portugal latest
2015
Percentage of adult population employed: Selected EU countries 75 70 65
Euro Area 19
60
Germany Finland
55
Ireland
50
Greece 2004Q1 2004Q4 2005Q3 2006Q2 2007Q1 2007Q4 2008Q3 2009Q2 2010Q1 2010Q4 2011Q3 2012Q2 2013Q1 2013Q4 2014Q3 2015Q2
45
Source: Eurostat
Percentage of adult population employed: Selected EU countries 75 70 65
Euro Area 19 US
60
Germany
55
Finland Ireland
50
Greece 2004Q1 2004Q4 2005Q3 2006Q2 2007Q1 2007Q4 2008Q3 2009Q2 2010Q1 2010Q4 2011Q3 2012Q2 2013Q1 2013Q4 2014Q3 2015Q2
45
Source: Eurostat
0
‐5 Peak to trough ‐10
Peak to end‐2015
‐15
‐20
Fall in % employed from 2007 peak European countries, percentage points Source: Eurostat
‐25
Source: Eurostat
130
Numbers at work index 2001=100: Selected EU countries
125 120
EA
115
Germany
110
Ireland
105
Greece
100
Spain Italy
95
Portugal
90
Finland
85
UK 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
80