1. EUROZONE AND FUTURE SCENARIOS
NO PAIN, NO GAIN....
The Italian-Slovak Chamber of Commerce
Elena Kohútiková
Deputy Chief Executive Officer
VÚB, a.s.
Bratislava, 23 May, 2012

2. Is this a Future of Europe?
More than 50 percent of investors predict Eurozone to loose its member, as Greece’s
election impasse threatens to push the debt crisis to new depths, according to Bloomberg
Global Poll
– In fact, a number of poll participants who predict a smaller euro area within a year ballooned in May
to 57 percent from 11 percent in January 2011
80 % of 1,253 investors, analysts and traders who Markets are more bearish
are Bloomberg subscribers expect further deepening
of European debt crisis
55 percent of participants said backsliding by
Europe posed a high risk to the world economy, while
the number of those who said the same of a hard
landing by China or gridlock among U.S. politicians is
fewer than a half
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3. Challenges for Europe and Eurozone
Macroeconomic consolidation versus economic growth?
Need of deeper cooperation and integration in EMU is not in contradiction to solve
specific issues of individual countries
Solidarity – not only EMU countries against the countries receiving help, but also
those countries to countries providing the help
Greece – a unique case?
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4. Macroeconomic Consolidation versus Economic Growth?
Era of positive mood and narrow spreads within the Eurozone has definitely gone
Yields of 10-year government bonds since 1990, % p.a.
36
fixing exchange rates The Greek PSI talks
(May 1998) (Aug 2011)
31
launching the
26
euro (Jan 1999) revision of greek
debt (Oct 2009)
21
Greece joined
the euro area
16 (Jan 2001)
bankruptcy
of Lehman
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6
1
3/90
3/91
3/92
3/93
3/94
3/95
3/96
3/97
3/98
3/99
3/00
3/01
3/02
3/03
3/04
3/05
3/06
3/07
3/08
3/09
3/10
3/11
3/12
Nemecko Španielsko Portugalsko Írsko
Grécko Taliansko Belgicko Francúzsko
Source: Bloomberg, VÚB
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5. Macroeconomic Consolidation versus Economic Growth?
While fourth quarter was in sign of deceleration, first quarter was already
negative for euro-area economy slipping into soft red numbers...
Euro area economy growth is heavily affected by fiscal tightening
GDP growth, historical and forecasted consensus values, % y/y
forecast
Odhad
3
1
-1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USA
-3
EA
-5
Key Task – how to consolidate and grow? Do we have scenarios ready?
Source: Bloomberg, VÚB
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6. New challenge: Macroeconomic Consolidation versus Economic Growth
= No! Consolidation AND Growth
Task of the day: not only fiscal consolidation and debt reduction, but moreover
simultaneously implementation of growth factors oriented not just to growth but at the
same time to solve the most urgent issues in individual countries:
High unemployment – especially of young people – is the syndrome of lost generation threatening
us? – supporting instruments of young people employment – supporting FDI and education and
science
Export competitiveness, also domestic demand in some countries – return to link the wage
development to productivity growth
Change of the ratio between the employed and unemployed part of population – it is not only an aging
issue
Restructuralisation, privatisation and FDI
Who will finance the GROWTH?
EIB, new EBRD?
Banks? (Which? Almost all are markedly noted down by crisis), Basel III?
Joint bonds?
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7. Need of Deeper Cooperation and Integration in EMU is not in
Contradiction to Solve Specific Issues of Individual Countries
EU level – deeper Cooperation – higher Integration
Improvement of economy governance
EU reinforces financial market supervision
Europe 2020 – restoring normal lending to economy, completing the Single Market,
strengthening innovation
Solution of the specific issues of Eurozone countries
Ireland – is a success story
Portugal – is on track
Italy – starts far reaching austerity and reform programme
Spain – committed to comprehensive adjustment
Greece – a unique case?
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8. Greece – a Unique Case?
Greece does not have a liquidity problem, but a SOLVENCY PROBLEM
Eurozone Member States will continue to support Greece .... as long as Greece continues to
implement the agreed conditionality
Two potential Greek scenarios are still realistic:
1. Greece will exit eurozone – either upon an agreement or impulsively – however, thus the problems
are not being solved - currency devaluation, potential problems in banking sector and real economy
will result into the urgency of hard consolidation
2. Greece stays in eurozone, reforms will be imposed from „TROJKA“ - it requires also solidarity of
Greek citizens with other countries of EMU – especially those who provide assistant , but also those
countries that might by adversely affected by leaving Greece from eurozone
Potential EMU and EU scenarios if Greece leaves EMU:
1. Greece will be considered as a UNIQUE CASE
2. Greece infection will be spread onto other countries being closely monitored by the market nowadays
3. The end of the Monetary Union? And what about EU?
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9. Thank you for your attention!
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10. This presentation contains information that is subject to the intellectual property rights
of the author. You are not allowed to use this presentation or any of it part without
authorization.
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