European Debt Crisis In Figures- Mercbelize, Commodity Exchange
Unemployment has raised much for EU after the recent economic and financial crisis and is now having an average of 7.5% as per the latest data by EU
.
EU Members with Year of Entry into the European Unionis given below based on the date of joining the European Union.
(Country and Joining Year respectively)
Belgium-1952
France-1952
Germany-1952
Luxembour-1952
Netherlands-1952
Denmark-1973
Ireland-1973
UnitedKingdom-1973
Greece-1981
Portugal-1986
Spain-1986
Austria-1995
Finland-1995
Sweden-1995
Cyprus-2004
ChechRepublic-2004
Estonia-2004
Hungary-2004
Latvia-2004
Lithuania-2004
Malta-2004
Poland-2004
Slovakia-2004
Slovenia-2004
Bulgaria-2007
Romania-2007
(Source: europa.eu)
Debt Crisis in Figures
1.10 Year Bonds
Bond Yield is the initial indicator which points that an economy is in a good shape or not. 10 Year Bond yields of Greece, Portugal, Spain and Italy are still at higher levels without changing much after rescue packages and stimulus measures from European Central Bank, IMF and ESMF within last one year. From the below table, it can be seen that Greece, Portugal, Spain and Italy are still facing hurdles in Bond market due to high yields for 10 year bonds primarily on low demand from market participants. These high yields suggests lack of demand on uncertainty surrounding European Union with investors not willing to buy bonds in the midst of stimulus packages announced so far.
(Country, Year and Change respectively)
Greece, 19.93%, -0.62
Portugal, 8.58%, -0.02
Spain, 5.76%, -0.01
Italy, 5.05%, +0.06
France,2.28%, 0.00
Netherlands, 1.87%, +0.01
UK, 1.83%, +0.04
Germany, 1.60%, +0.02
(source: bloomberg.com)
Yield is inversely proportional to Bond prices, as rise in Prices cause low yields and vice versa.
(Bond-Yield = Coupon Rate of a Bond / Current Market price of the Bond). Since Coupon rate is constant and Price of the bond is the only variable factor in calculation of Bond-Yield.
Rise in yield moves according to a countrys financial strength. Investors want to have higher rate of return for their investments and hence reliability on returns from these EU countries is a matter of concern for most of institutional investors. This reliability will come only when GDP of a nation is in a better condition. Lets take a look on GDP situation of these EU countries.
2.GDP Change
GDP of Greece, Portugal, Italy and Ireland are still in the negative territory for the last one year and hence these countries debt repayment makes harder for investors to believe in the current market condition. Following GDP table for these EU countries will give a clear picture.
(Country and %YoY respectively)
Greece,-6.3%
Portugal,-3.3%
Italy,-2.6%
Spain,-1.3%
Ireland,-1.1%
UK,-0.5%
Netherlands,-0.5%
Belgium,-0.3%
France,0.3%
Germany,1.0%
(source: bloomberg.com)
From the above table, you see how worse the GDP situation of Greece, Portugal, Italy and Spain is. GDP is the Gross Domestic Product of a country which is the net sum of all goods and services produced from a country. A minus GDP figure points that revenue of a country has fallen significantly or expenditure has risen heavily. To confirm whether GDP has caused due to rise in expenditure or fall in revenue, we shall check the debt levels as a percentage of GDP for these countries.
3.Debt Levels
Debt level as a percentage of GDP for worst affected EU countries makes it clear that much expenditure without proper return on investment was the prime cause of failure for these countries and it has been occurring for several years at much higher levels. The more a countrys debt level to its GDP, the lesser will be for investment thereby stagnating growth further. Below table gives a clear picture of Debt as a percentage of GDP as of Dec 2011.
(Country, %Last and %Year Ago respectively)
Greece,165.3%,145.0%
Italy,120.1%,118.6%
Ireland,108.2%,92.5%
Portugal,107.8%,93.3%
Belgium,98.0%,96.0%
France,85.8%,82.3%
UK,85.7%,79.6%
Germany,81.2%,83.0%
Spain,68.5%.61.2%
Netherlands,65.2%,62.9%
(source: bloomberg.com)
4.Budget Balance
EU countries in the recession zone are having negative budget balance indicating high budget deficit for these governments. This indicates how much a government has to borrow for running the country and the more it borrows its debt to GDP levels will also increase. Following table (as of June 2012) shows how intense is the situation in Ireland, Greece and Spain to run their governments on a daily basis.
(Country, %Last and % Year Ago respectively)
Ireland,-13.1%,-31.2%
Greece,-9.1%,-10.3%
Spain,-8.5%,-9.3%
UK,-8.3%,-10.2%
France,-5.2%,-7.1%
Netherlands,-4.7%,-5.1%
Portugal,-4.2%,-9.8%
Italy,-3.9%,-4.6%
Belgium,-3.7%,-3.8%
Germany,-1.0%,-4.3%
(source: bloomberg.com)
5.Unemployment
The above debt levels has caused unemployment to rise at ever high levels for these Eurozone countries as never as ever before and is now at 25% for Spain, Greece at 24.4%, Portugal at 15.7%, ireland at 14.9% and Italy and France above 10% levels. This higher unemployment can significantly lower government revenues if the government is not able to control budget deficit. However, governments in these EU countries may take much time to solve the debt crisis due to the high degree of economic slowdown.
(Country, % Last and Date respectively)
Spain, 25.1%, Jul 31
Greece, 24.4%, Jun 30
Portugal, 15.7%, Jul 31
Ireland,14.9%, Jul 31
Italy, 10.7%, Jul 31
France, 10.3%, Jul 31
UK, 8.1%, Jun 30
Belgium, 7.2%, Jul 31
Germany, 5.5%, Jul 31
Netherlands, 5.3%, Aug 31
(source: bloomberg.com)
by: Merc
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