您的当前位置：首页 Fiscal, economic and financial vulnerabilities implications for Euro area surveillance

Fiscal, economic and financial vulnerabilities implications for Euro area surveillance

来源：世旅网

This article was downloaded by: [UNIVERSITY OF ADELAIDE LIBRARIES]On: 08 December 2013, At: 22:48Publisher: Routledge

Informa Ltd Registered in England and Wales Registered Number: 10729 Registered office: Mortimer House,37-41 Mortimer Street, London W1T 3JH, UK

Applied Economics

Publication details, including instructions for authors and subscription information:http://www.tandfonline.com/loi/raec20Fiscal, economic and financial vulnerabilities:implications for Euro area surveillance

Christian Kastrop, Sarah Ciaglia, Werner Ebert, Sibylle Stoßberg & Stefanie Wolff-Hamacher

German Federal Ministry of Finance, D-10117 Berlin, GermanyPublished online: 29 Nov 2013.

To cite this article: Christian Kastrop, Sarah Ciaglia, Werner Ebert, Sibylle Stoßberg & Stefanie Wolff-Hamacher (2014) Fiscal,economic and financial vulnerabilities: implications for Euro area surveillance, Applied Economics, 46:6, 603-615To link to this article: http://dx.doi.org/10.1080/00036846.2013.861588PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) containedin the publications on our platform. However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of theContent. Any opinions and views expressed in this publication are the opinions and views of the authors, andare not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon andshould be independently verified with primary sources of information. Taylor and Francis shall not be liable forany losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoeveror howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use ofthe Content.This article may be used for research, teaching, and private study purposes. Any substantial or systematicreproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in anyform to anyone is expressly forbidden. Terms & Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditionsAppliedEconomics,2014

Vol.46,No.6,603–615,http://dx.doi.org/10.1080/00036846.2013.861588

Fiscal,economicandfinancial

vulnerabilities:implicationsforEuroareasurveillance

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 ChristianKastrop*,SarahCiaglia,WernerEbert,SibylleStoßbergandStefanieWolff-Hamacher

GermanFederalMinistryofFinance,D-10117Berlin,Germany

Soundpublicﬁnancesarenecessaryforthefunctioningandeconomicprosperityofacommoncurrencyunion.Theﬁnancial,economicandEuropeansovereigndebtcrisesrevealedthatﬁnancialstabilityandeconomicgrowthalsoserveasprerequisitesandthatallthreeinteractinthisrespect.ThishasmadeclearthatcontainingrelatedvulnerabilitiesandrisksinordertoeffectivelypreventseriouscrisesiscomplexandnotsufﬁcientlyaddressedbythecurrentinstitutionalframeworkoftheEuroarea.Substantialinstitutionalshortcomingsarenowbeingaddressedbyreforms.However,inthisarticle,wearguethatfurtherinstitutionalreformsareneededinordertointegratevulnerabilityandriskanalysesintosurveillanceprocesses.Aboveall,weproposesettingupaninde-pendentexpertcouncilthatischargedwiththeevaluationofallsurveillanceprocesses.

Keywords:Euroarea;institutions;macro-prudentialsurveillance;ﬁscalpolicyJELClassiﬁcation:E62;F36;F55;H77;H87

I.Introduction

Sustainablepublicﬁnancesandstableﬁnancialmarketscanbeseenasvitalpreconditionsforgrowth(Baumetal.,2012;KumarandWoo,2013).Theﬁnancial,economicandEuropeansovereigndebtcriseshaverevealedthatexistingEUsurveillanceprocesseswere–conceptuallyandinstitutionally–notcapableofdetectingandreducingﬁscal,ﬁnancialandrealeconomicvulnerabilitiesandrisksatanearlystage.Asaresult,internationalinstitutionsaredevelopingmethodstobettercapturesuchvulnerabilitiesandrisks1(seeIMF,2010;EC,2011;ECB,2012).Therecentlyimplementedmechanismstocopewiththecrisesaresupposedtorespondinanadhocmannertothecurrentchallengesasriskshavealreadymaterialized,andatthesametimeseektocorrectsevereinstitutionalﬂaws.

Inordertopreventfuturecrises,‘ﬁnancialstability’2isgenerallydeemedtobeatthecentreofsurveillancepro-cesses,particularlysinceitissupposedtobethebasisforanyeconomicandﬁscalactions.AstheECBputsit,

*Correspondingauthor.E-mail:Christian.Kastrop@bmf.bund.de1Weusetheterm‘vulnerability’todescribeacharacteristicshortcomingofaninstitution,actororsituationthatmaybeinherentorself-made.AbankhavingadisproportionalamountofsovereignbondsofcountryXisvulnerabletoX’sﬁnancialsituation.However,aslongasthiscountryrunssustainablepublicﬁnances,thebank’sliquidityandsolvencyriskswouldstillbelow.Hence,astheIMFsummarizes,avulnerabilityisa‘necessary,butnotasufﬁcient,conditionforacrisis’(IMF,2010,p.8).Ariskthendescribestheextenttowhichavulnerabilitymaymaterializeunderspeciﬁcconditions,ase.g.X’spublicﬁnancessustainabilitydecreases(cf.ECB,2010,p.139).2AstheECB,weusetheterm‘ﬁnancialstability’todescribea‘conditioninwhichtheﬁnancialsystem–whichcomprisesﬁnancialintermediaries,marketsandmarketinfrastructures–iscapableofwithstandingshocksandtheunravellingofﬁnancialimbalances’(ECB,2012,p.5).

604

‘systemicrisk’is‘theriskthatﬁnancialinstabilitybecomessowidespreadthatitimpairsthefunctioningofaﬁnancialsystemtothepointwhereeconomicgrowthandwelfaresuffermaterially’(ECB,2010,p.138).Hence,monitoringfocussesontheﬁnancialsystematamacro-levelwithrespecttomicro-levelﬁnancialsupervisionandmacroeconomicdevelopments.Wearguethattheimplica-tionsofﬁnancialstabilityandtherealeconomyonpublicﬁnancesalsoneedtobeconsidered.Theaimistointegratealloftheseaspectsinasurveillancemechanismcapturing‘systemicrisks’(BIS,FSBandIMF,2011,p.4).Also,someinstitutionalstepshavebeentaken,asforexamplethestrengtheningoftheFinancialStabilityBoard(FSB),theestablishmentoftheEuropeanSystemicRiskBoard(ESRB)andthefosteringofEuropeanﬁscalandmacro-economicsurveillance.However,anintegratedframe-workanalysingﬁscal,ﬁnancialandrealeconomicvulnerabilitiesandriskscomprehensivelyfortheEuroareahasthusfarbeenmissing.Thisarticleaddressesthisgapbyproposingsomeinstitutionalreforms.WeaimatdetectingtowhatextentvulnerabilitiesandrisksarealreadyconsideredandwhatﬂawsneedtobeaddressedbyfurtherinstitutionalreformsintheEuroarea.Speciﬁcally,weasktowhatextentvulnerabilityandriskconceptscouldbeintegratedintheEuroareasurveillanceframeworktoimproveit.

Theremainderofthisarticleisorganizedasfollows.First,wereviewmethodstodetectvulnerabilitiesandrisksconsideredbytheIMF,theECandtheECB.Second,wepresentanoverviewofthecurrentﬁscal,macroeconomicandmacro-prudentialsurveillanceprocessesintheEuroarea.Finally,wedevelopideasonhowtointegratevulner-abilityandriskanalysesintotheEuroareasurveillanceframework.Sincetheassessmentofvulnerabilitiesandriskshasbecomeincreasinglyimportantalsotothepoli-ticalsphere,wederiveourassessmentsandproposalsfromapolicy-orientedpointofview,whichisnecessarilymorepracticalandpoliticaleconomyorientedthananacademicone.

II.VulnerabilityConceptsandIndicatorsTheIMF’scontributiontotheIMF–FSBEarlyWarningExercise

Inreactiontothe2008/2009ﬁnancialcrisisandattherequestoftheG20,theIMFandFSBcreatedanEarlyWarningExercise(EWE;IMF,2010).TheIMF’scontri-butiontotheEWEisbasedonbothqualitativeandquan-titativeanalyses.Initsquantitativeanalyses,theIMFusesavarietyofvariables,indicators,andmodelstomeasuremacroeconomicandﬁnancialvulnerabilitiesandrisksinindividualcountries(cf.Table1).Inordertoreachanoverallassessmentofacountry’svulnerabilities,theIMF

C.Kastropetal.

Table1.Variables,indicatorsandmodelsusedbytheIMF’sEWE

AEsEMs

Medium-termvariablesRealGDPgrowth✓Houseprices✓Stockprices✓Privatecredit

✓ConstructionsectorcontributiontoGDPgrowth✓FinancialsectorcontributiontoGDPgrowth✓

Near-termvariablesExternalsector

Reservecoverageofshort-termdebtandprojectedcurrentaccountdeﬁcit✓✓Currentaccount/GDP✓✓Externaldebt/GDP

✓

✓Externaldebt/exportsofgoodsandservices✓Realexportgrowth

✓Realeffectiveexchangerateovervaluation✓CGERcurrentaccountnormdeviation✓PrivatesectorexternaldebtPublicsector

Generalgovernmentbalance/GDP✓✓Primarygap

✓

✓Generalgovernmentgrossdebt/GDP✓Publicdebtexposedtocurrencyrisk✓Publicdebtexposedtorolloverrisk✓Governmentrevenue,percentchange✓FinancialsectorInﬂation

✓✓Capitaladequacyratio(banks)✓✓Returnonassets(banks)

✓✓Nonperformingloans(in%oftotalloans)✓

✓AnnualchangeinprivatesectorcredittoGDPratio

✓Dummyforinstitutional/structuralweakness✓Bankcross-borderinﬂows(percentchange)✓Loan/depositsratio✓

Corporatesector

Black–Scholes–Mertondefaultprobability(corporate)

✓✓Returnonassets(corporate)✓✓Price/earningsratio(corporate)✓

✓Interestcoverageratio✓Debt/assets✓Householdsector

Housepriceacceleration✓✓

Stockpriceacceleration✓Householdliabilities/GDP

✓Interaction(householdliabilities)x(medium-termhousepriceincrease)✓Interaction(householdliabilities)x(housepriceacceleration

✓

Source:IMF(2010)

Notes:AEs:advancedeconomies;EMs:emergingeconomies.

usestheso-called‘signallingapproach’(Kaminskyetal.,1998;KaminskyandReinhart,1999).Inthisapproach,historicaldataisusedtodeterminecriticalthresholdvaluesforasetofvariablesthathaveinthepastbeen

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 Fiscal,economicandfinancialvulnerabilities

linkedtoanupcomingcrisissituation(cf.EC,2011,p.7).Vulnerabilitiescanbeidentiﬁedbycomparingthesethresholdvalueswithactualvalues.Themethodologyconsistsofthreesteps.First,pastcrisisepisodesareiden-tiﬁedbyapplyingasetofpredeﬁnedcriteria.3Additionally,anumberofvariablesandindicatorsareselectedthataredeemedtohavebeenrelevantduringtheonsetofpastepisodesofthisparticulartypeofcrisis.Second,thresholdvaluesfortheseindicatorsaredeter-mined.4Third,thresholdvaluesarecomparedtoactualvalues.Anaggregatedindicatoriscalculatedforeachcountryforeverysector,andﬁnallyanoverallcountryvulnerabilityindicator.

SincetheEWEtriestocoverasmanyoftheIMF’smembersaspossible,datalimitationsrestrictthechoiceofvariablesandindicatorstoanalysevulnerabilitiesandrisksinindividualsectors.TheEWEisstillatanearlystageandwillbefurtherdeveloped.AnexampleofhowtheIMFfurtherdeepensitsanalysesisitsworkonﬁscalvulnerabilities,andinparticulartheso-called‘RiskOctagon’(Cottarelli,2011,cf.Fig.1andTable2).This‘RiskOctagon’wasfurtheroperationalizedinthefollow-ingworksoftheIMF.5Onestrandofworkfocussedontheselectionofsuitablevariablesandindicators.Forexample,Baldaccietal.(2011a)haveextendedthelistofbasicﬁscal

Table2.RiskoctagonaccordingtoCottarelli(2011)

605

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 Basicﬁscalvariables

Short-andmedium-termtrends:

CyclicallyadjustedprimarybalanceGrossgovernmentdebt

DifferentialbetweeninterestrateonpublicdebtandthegrowthrateofGDP

Long-termtrendsintheﬁscalvariables(belongingtotheﬁrstdimension):

PensionspendingtrendsHealthcarespendingtrendsAssetandliabilitymanagement:MaturityofgovernmentdebtSovereignbondrollovers

Uncertaintyaroundthebaselineprojections(describedintheﬁrstthreedimensions)

Contingentliabilities(contractualobligationsand

noncontractualcommitmentssuchasthosearisingfromtheﬁnancialsector)

Macroeconomicassumptions(growthrate,interestrate,exchangerate)

FiscalpolicydeviationsOtherfactorsNonﬁscalvariables

CurrentaccountbalancePrivatedebt

MarketsentimentorriskappetiteSource:Cottarelli(2011).

Shocksaffecting thebaseline

Macro shocks

Contingentliabilities

Long-termfiscal trends

Shocksaffecting fiscal

policy

Nonfiscalvulnerabilities

Marketsentiment

A&Lmanagement

Projectedfiscal vari-ables usingbaselineassumptions

Basic fiscalvariables

Other factors

Fig.1.RiskoctagonaccordingtoCottarelli(2011)Source:Cottarelli(2011).

Thesecriteriavarydependingonthetypeofcrisisthatisatthecentreoftheanalysis.Forexample,inordertoidentifyaﬁscalcrisisinadvancedeconomies,Baldaccietal.(2011b)takeintoaccountfourcriteria:ahighyearlyinﬂationrate,theoccurrenceofpublicdebtdefaultorrestructuring,therealizationofalarge-scaleIMF-supportedprogrammeandalargedeviationofsovereignbondyieldspreads.4Twowaystoidentifythesethresholdsareusedintheliterature:oneistominimizetotalmisclassiﬁederrors,i.e.theweightedsumoffalsepositivecrisissignals(typeIerrors)andfalsenegativecrisissignals(typeIIerrors).Anotheristomaximizethesignal-to-noiseratio,i.e.theratioofthepercentageoftruepositivesignals(1–typeIIerrors)tothepercentageoffalsepositivesignals(typeIerrors)(cf.Baldaccietal.,2011b).5Cottarelli’s(2011)approachhasalsobeenusedintheIMFFiscalMonitorsasof2011;duetodatalimitations,however,thisapproachhassofaronlybeenappliedtocountrygroups,notindividualcountries.

3606

Table3.Fiscalmonitoringindicators

Basicﬁscalvariables(short-andmedium-termﬁscaldevelopments)

Generalgovernmentgross/netdebt(%GDP)

Cyclicallyadjustedprimarybalance(%potentialGDP)Projectedgrowth-adjustedinterestrate(r-g;5or10yearaverage)

Long-termﬁscaltrends

Totalfertilityrate(deviationfrom2.1)Oldagedependencyrationprojections

Long-termprojectionsofpublicpensionexpenditure(%GDP)Long-termprojectionsofpublichealthexpenditure(%GDP)Assetandliabilitymanagement

Currentgrossﬁnancingneeds(%GDP)

Shareofshort-term(public)debtasaratiooftotal(public)debtDebtdenominatedinforeigncurrencies(%totaldebt)Debtheldbynonresidents(%totaldebt)

Weightedaveragematurityofoutstandinggeneralgovernmentdebt(years)

ForEMEsonly:Short-termexternaldebt(%grossinternationalreserves)

Source:Baldaccietal.(2011a).

C.Kastropetal.

developmentsdifferingfromthoseobservedforpreviouscrises.Whileitcanthusveryeffectivelyserveasaﬁrst‘screening’inasurveillanceprocess,itshouldalwaysbeaccompaniedbyfurthersurveillancetools.TheEC’sreportonpublicfinancesinEMU

Inits2011reportonPublicFinancesinEMU,theECanalysespossibletoolstostrengthenitscapacitytodetectﬁscaldistressinmemberstatesatanearlystageandtothereforecomplementitswell-establishedlong-termﬁscalsustainabilityanalysis(EC,2011).8OneoftheapproachesoutlinedinthereportinvestigatesthepotentialimpactofthebalancesheetsituationofbanksonpublicﬁnancesbasedontheSYMBOLmodel(SYstemicModelofBankingOriginatedLosses).9SYMBOLwasdevelopedbytheECandateamofacademicexpertsonbankingregulationandisalreadyusedtoassesstheimpactofregulationpolicyproposalsaimedatincreasingﬁnancialmarketstability(cf.Campolongoetal.,2011).Themodelfollowsabottom-upapproach:Basedontheestimationofdefaultrisksofbankobligors,thedefaultprobabilityofindividualbanksandsubsequentlytheprobabilityofaggregateindividualbanklossesaredeterminedforeachcountry.Oncetheprobabilitydistributionoflossesofacountry’sbankingsystemasawholehasbeenestimated,thepossibleriskstopublicﬁnancesderivingfromtheselossesarededucted.Thisiscarriedoutundertheassump-tionthatthegovernmentwouldcoveralllossesthatneitherthebank’scapitalnortheexistingtoolsoftheﬁnancialsafetynet,suchasdepositguaranteeschemes(DGSs)andbankresolutionfunds(BRFs),areabletoabsorb.Calculationsarecarriedoutfordifferentregula-toryframeworkscenarios10andanumberofsustainabilityindicatorsaredetermined.Oneoftheseindicatorslinksthisapproachtothelong-termﬁscalsustainabilitymetho-dologyusedbytheECinitsSustainabilityReports(cf.EC,2009).Itistheprobabilitythatacountry’slong-termsustainabilitygap(S2indicator)11exceeds6%ofGDPduetolossesinthebankingsystemandthereforeclassiﬁesashighrisk(EC,2011).

Overall,theSYMBOLmodelcouldbeausefultooltocomplementtheEC’straditionaldebtsustainabilityassessmentwithafocusonaspeciﬁc,highlyrelevantriskfactor,i.e.theﬁnancialsector.Oneofitsbeneﬁtsis

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 variablesandthenidentiﬁed13suitableones(cf.Table3).Schaechteretal.(2012)haveaddedfurthervariablesandindicatorsfromotherdimensionsoftheRiskOctagon.Inparticular,theyalsoconsidermacroeconomicshocksvis-à-visthebaselinescenarioandtheyincludemarket-basedriskvariablesandindicatorsaswellasindicatorsforspill-overrisks(cf.Table4).6Anotherstrandofworkfocussedonassessingtheoverallvulnerabilityofacountry.Inparticular,Baldaccietal.(2011b)proposethesignallingapproachasanappropriatemethod.7TheIMFhasthusdevelopedanumberofpotentiallyusefultoolsthatcouldalsobeusedforvulnerabilityandriskassessmentsintheEuroarea.Inparticular,thesignal-lingapproachcouldserveasamethodologicalframeworkofaEuroareaEarlyWarningSystem.Amajoradvantageofthisapproachisthatitsmethodologyisinternationallypractisedandrelativelyeasytohandle.However,therearealsoanumberofmethodologicaldrawbacks.First,itisneitherpossibletotestindividualvariablesfortheircon-ditionalstatisticalsigniﬁcancenortoaccountforcorrela-tionsbetweenvariables(cf.Baldaccietal.,2011b;EC,2011).Anothershortcomingisthattheanalysisisbasedonhistoricaldata.Afuturecrisismaybeprecededby

67TheIMFplanstoextendthis‘toolkit’toincludetheinvestorbasis,thecurrencyinwhichdebtisdenominatedandcontingentliabilities.Foradetaileddescriptionoftheunivariatesignallingapproachtoidentifyﬁscalsustainabilityrisks,refertoBaldaccietal.(2011b).Comparedtoearlierworks,Baldaccietal.(2011a)usethebroaderdeﬁnitionofﬁscalcrisesintroducedbyCottarelli(2011).8Overall,fourapproachesarepresentedinthe2011reportonpublicﬁnancesinEMU.OnlytwowillbediscussedinthisarticleastheyarealreadyusedorplannedtobeusedbytheECforvulnerabilityassessment.9DetailsonthemethodologyarelaidoutinDeLisaetal.(2010).10Theregulatoryframeworkscenariosvarywithrespecttotheunderlyingcapitalrequirements,withrespecttowhetherdepositguaranteeschemesandbankresolutionfundsareinplacetoabsorbbankinglosses,whetherabail-inruleofbondholdersandnoncovereddepositorsexists,andwhethercontagioneffectsaretakenintoaccount(cf.EC,2011).11TheS2-Indicatorexpressesthe‘permanentadjustmentintheprimarybalancenecessarytomeettheintertemporalbudgetconstraintoveraninﬁnitehorizon’(EC,2009,p.34).

Fiscal,economicandfinancialvulnerabilities

Table4.ToolkitforassessingﬁscalvulnerabilitiesinadvancedeconomiesaccordingtoSchaechteretal.(2012)

607

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 Short-termﬁnancingpressures

Grossfundingneeds(short±mediumterm)

Needforlargenewissuanceofdebttoﬁnanceaﬁscaldeﬁcit+needtoreﬁnancelargeamountsofmaturingdebtCurrentstockofgeneralgovernmentdebt/averagedebtmaturityMarkets’perceptionofsovereigndefaultriskaCreditdefaultswap(CDS)spreadsRelativeassetswap(RAS)spreadsDistressdependenceamongsovereigns

probabilityofsovereigndistressinonecountrygivendefaultinanothercountryMedium-andlong-termpressures

Medium-andlong-termadjustmentneedstoensureﬁscalsustainability

Cyclicallyadjustedprimarybalancethathastoberealizedby2020andmaintaineduntil2030toreachadebtlevelof60%ofGDPby2030bPrimarybalancein2016thatwouldbeconsistentwithstabilizingthedebtlevelintheverylongrun,inordertosatisfytheintertemporalbudgetconstraintInterestrate–growthdifferential

Growthshocks(e.g.realGDPgrowth–1ppcomparedtobaseline)Interestrateshocks(e.g.interestrates+100bpsoverthemediumterm)Stochasticsimulations:riskstopublicdebttrajectoriescSource:Schaechter,A.etal.(2012).

Notes:aTheIMFnotesthatcautionisneededwheninterpretinghigh-frequencyﬁnancialmarketindicatorslikeCDSandRASspreads.Inparticular,therisksmeasuredbytheseindicatorsdependnotonlyonﬁscalvulnerabilitiesbutalsoonglobalandﬁnancialfactors.bIfthedebtlevelinthestartingyearislessthan60%ofGDP,thatlevelissetasthe2030-target.Forcountrieswithlargeﬁnancialassetsnetdebttargetsareassumed.cThecomputationofpublicdebttrajectoriesreliesonarisk-basedapproachtodebtsustainability.

thatitsresultscanalsodirectlyfeedintothelong-termsustainabilityanalysisalreadycarriedoutbytheEC.However,severalissueswouldneedtobeaddressedbeforeimplementation,suchasquality,coverageandtimelinessoftheunderlyingdata.Furthermore,themodeldoesnotconsidertheimpactofdifferentmacro-economicscenariosandsomesimpliﬁcations,suchastheassumptionthatallbankassetsareloans,weakenthestrengthoftheresults(cf.EC,2011).

TheEC(2011)alsopresentsaﬁscalcrisisriskmodelbasedonthesignallingapproachandisconsideringincludingthemodelinitsupcomingSustainabilityReport2012inordertoassessrisksforshort-termﬁscalsustainability.ThemethodologyismainlyadoptedfromrecentIMFresearchworkonassessingﬁscalstress(cf.Baldaccietal.,2011b),butisadjustedtotheEuropeancontext.TheECchoosesanumberofﬁscalvariables,buttakesonabroaderperspectivebyalsousingmacro-ﬁnan-cialvariables.Whencalculatingoptimalthresholds,theECanalysesthesamefourcriteriatoidentifyanepisodeofﬁscaldistress.12Theauthorscalculatecross-countryresultsfortheindividualandthematiccompositeindica-tors(ﬁscalvs.ﬁnancial-competitiveness)andacompositeindicatorofallvariables(cf.Table5).Overall,theEC’sconsiderationsshowthatthesignallingapproachcanbeusedﬂexiblywhensettingupanearlywarningsystem,

12adaptedtoaspeciﬁcregionalcontextandallowsforset-tingdifferentanalyticalpriorities.TheECB’sfinancialstabilityreview

TheECBisintenselyworkingon‘developingtoolsandmodelswhichcanbeusedtomonitor,identifyandassesspotentialthreatstothestabilityoftheﬁnancialsystem’(ECB,2011a,p.141;seealsoECB,2011b,149ff.).Amongthese,theECB’sFinancialStabilityReviewisoneofthefewpublicallyavailablemacro-prudentialstu-dies.TheECBanalysesthecurrentstateoftheEuroarea’sﬁnancialstabilityanditsimpactonrealeconomicdevel-opments.Inaﬁrststep,thereportanalyses‘macrorisks’(ECB,2012,15ff.),suchasinternationalﬁnancialspill-oversandgeographicalriskaccumulationsaswellasoilprices.Thefocusliesonassessingtrendsandtracingabroadpictureofthegeneralglobalﬁnancialsituation.Inordertoassessmacrorisks,theECBemploystwomodelsaimingatdetectingacountry’soraregion’scontributiontoglobalﬁnancialmarketstress.Inasecondstep,theECBanalyses‘creditrisks’(ECB,2012,27ff.)atthegloballevelinmoredetail.Creditdemandandsupplyforhouse-holdsandthecorporatesectoraswellaspublicﬁnancesandtherelatedmacroeconomicoutlookareatthecoreoftheanalysis.Then,theECBlooksattheﬁnancialsystemspeciﬁcallywithregardtotheEuroarea.Afterhaving

SomeminordifferencesexistasBaldaccietal.(2011b)setdifferentthresholdsforemergingandfordevelopedeconomieswithregardtotheinﬂationrate,whiletheEC(2009)approachonlyconsidersdevelopedeconomies.

608

Table5.Variablesusedinthe2011ReportonPublicFinancesinEMUforthecompositionoftheﬁscalindexandtheﬁnancial-competitivenessindex(EC,2011)

FiscalIndexBalance,%GDP

Primarybalance,%GDP

Cyclicallyadjustedbalance,%GDPStabilizingprimarybalance,%GDPGrossdebt,%GDP

Changeingrossdebt,%GDP

Short-termdebt,government,%GDPNetdebt,%GDP

Interestrate–growthdifferential

Changeinexpenditureofgeneralgovernment,%GDP

Changeinﬁnalconsumptionexpenditureofgeneralgovernment,%GDP

Old-agedependencyratio20yearsahead

Averageyearlychangeinprojectedage-relatedpublicexpenditureas%ofGDPoverthenext30yearsFinancial-competitivenessIndex

Netﬁnancialassets,totaleconomy,%GDPNetsavingsofhouseholds,%GDP

Netsavingsofnonﬁnancialcorporations,%GDPPrivatesectordebt,%GDP

Netacquisitionofﬁnancialassets,privatesector,%GDPLeverage,ﬁnancialcorporations

Short-termdebt,nonﬁnancialcorp.,%GDPRealshort-terminterestrateConstruction,%valueaddedCurrentaccount,%GDP

Averagegrowthrateofrealeffectiveexchangerate,basedonexportsdeﬂator,ref.35countries

Averagegrowthrateofnominalunitlabourcostsoverthelast3years

RealGDPgrowth

GDPpercapitainPPP,%ofUSlevelSource:EC(2011).

C.Kastropetal.

focussesonﬁnancialmarketactorsandonlyconsiderspublicﬁnancesandtherealeconomywithregardtotheirimpactonthem.Amoredetailedanalysisofspeciﬁcproducts,especiallywithregardtotheirvolume,regionalandﬁnancialsectorrelateddispersion,mightbehelpfulingettingabroadviewonﬁnancialstability.

Inconclusion,eachofthethreeconceptsfollowsadifferentapproach.WhiletheIMFconsidersabroadrangeofvariablesinordertoissueearly-warningrecom-mendationsinitscontributiontotheEWE,theECspeci-ﬁcallylooksatdifferentﬁscalvulnerabilityassessmenttools.TheECBfocussesonﬁnancialstabilitywhileusingsomemacro-stress-testingmodelsandﬁnancialsta-bilityindicators.Whatismissingsofararesubstantivecontagionmodelsandadeeperintegrationofrealecon-omyandpublicﬁnancesdevelopmentsintotheanalysis.Also,theseapproachesshouldbeusedinsurveillanceprocessestoactuallypreventvulnerabilitiesandrisksfromincreasingandmaterializinginacrisis.

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 III.Fiscal,macroeconomicand

macro-prudentialsurveillanceprocessesintheEuroareaAlthoughﬁscal,ﬁnancialandrealeconomicdevelop-mentsarealreadysubjecttosupervisioninEurope(cf.Fig.2),theirsurveillanceisnotascomprehensiveasnecessarytopreventcrises.Mostimportantly,thedifferentbranchesarenotconsideredinaninterconnectedframe-work.Overthelastfewyears,economiccooperationinEuropehasbeenfostered,surveillanceofpublicﬁnancesintheEuroareahasbeenstrengthened,surveillanceofﬁnancialmarketshasbeenimprovedandamacro-pruden-tialsupervisorybodywasestablished.Takingstockofthesesurveillanceprocesses,wefocusongapsregardingtheidentiﬁcationofvulnerabilitiesandrisksandweiden-tifyelementsthatneedtobeimproved.13●FiscalsurveillancebytheStabilityandGrowthPact

(SGP)includingthecorrespondingsustainabilityanalyses,theEuropeanSemesterandtheFiscalCompact,

●EconomicsurveillancewithintheMacroeconomic

ImbalanceProcedure(MIP)and

●Macro-prudentialsurveillancebytheESRB.

tracedthisbroadpicture,thereportexaminesﬁnancialinstitutionsintheEuroareafocussingontheproﬁtability,liquidityandfundingstructureofLCBGs,banksandinsurancecompanies.Moreover,theirinter-linkageswitheachotheraswellassovereignandrealeconomyfundingareconsideredinordertoassesstherelatedsectoralandregionalresilienceoftheseﬁnancialinstitutionsandthepossibleregional,sectoralorspill-overeffectswithintheﬁnancialsector.

IncontrasttothepresentedmethodsoftheIMFandtheEC,theECBmainlylooksatdescriptivestatisticsandonlyusessomeindicatorsandsimulations.Thereport

TheEuro-Plus-PactandtheEurope2020Strategywillnotbeconsideredherealthoughonemightalsomakeuseoftheselessinstitutionalizedprocessestoimprovesurveillanceofvulnerabilitiesandrisks.Moreover,wedonotconsidermicro-prudentialsuper-visoryagenciesandtheFSBasitisnotpartoftheEuroarealevelinstitutionalsetting.Also,wedonotconsiderﬁnancialsupportprogrammeagenciesastheyareclearlysupposedtobetemporary.Foranoverviewandgeneralassessmentoftherecentreformpackages,cf.KastropandEbert(2009,2012).

13Fiscal,economicandfinancialvulnerabilities

ThereformedSGP

Whenassessingthecurrentreformpackagelabelled‘SGP3.0’(cf.Fig.3),14itbecomesobviousthatmajorinstitu-tionalgapsregardingthemonitoringofvulnerabilitiesandriskshavenotbeenclosed,notevenbytheFiscalCompactsignedinMarch2012bytheHeadsofStateandGovernmentasaninternationaltreaty.However,thereissomeimprovementunderthenewSGPregime,asthepublicdebtreferencevalueof60%ofGDPisnowtrans-parentanditscomplianceisenforcedbysanctions.Countrieswithdebtlevelsabovethatthresholdneedtoreducethedifferencebetweentheactualdebtlevelandthe60%-referenceby1/20peryear.ThisrequirementisbackedbytheFiscalCompactobligingtheEUMemberStates(MS)toimplementthatruleintheirnationallaws.Nationallawscanbeappealedatacourtandarenotsubjecttopoliticallog-rolling,e.g.intheECOFINCouncil.Theprincipleofabalancedbudgethasbecomecompulsoryandwillbebackedbysanctionsoverthemediumterm.Aviolationofthereferencevalueoraninsufﬁcientreductionofthedebtlevelleadstoanexces-sivedeﬁcitprocedure(EDP)andmoreeasilytosanctions(seeFig.3).

609

BesidespoliticaleconomicamendmentsdesignedtoimprovecompliancewiththeSGP,thequestionisinwhichrespectthecriteriaforsoundpublicﬁnancesandtheassessmentbytheECandtheCouncilaresufﬁcienttocapturevulnerabilitiesandrisks.Publicdebtasapast-relatedconceptsumsuphistoricaldeﬁcitsandinthatrespectrevealsthevulnerabilityofpublicﬁnancestointerestratedevelopmentsonﬁnancialmarkets.ThathasbeenstressedbytheIMF(Schaechteretal.,2012)andcancurrentlyberecognizeddailyinhigh-debtEuroareacoun-tries’publicﬁnances.Thepublicdeﬁcitasadynamicconceptindicatestheshort-termpublicﬁnancerecordofanMSatthepresentandintheverynearfutureandinthatrespectcapturespublicﬁnancerisksonlytoalimitedextent.

However,themonitoringoftheMaastrichtreferencevaluesperseisnotsufﬁcienttoavoidcrises,i.e.thematerializationofrisks:itisinprinciplenotpossibletocaptureallrisksforpublicﬁnancesinthepublicbudgetsandﬁscalplansinadeterministicmanner.Withaninher-entelementofuncertaintyinprojections,thedeﬁcitanddebtschedulessubmittedbytheMSincorporaterisks,explicitlyorimplicitly,onlytoalimitedextent(risksstemmingfromtheeconomy,ﬁnancialmarketsorpublic

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 Euro Area Surveillance Processes

Public Finances

Fiscal Compact

SGP

European Semester

Real Economy

MIPEuro-Plus-PactEurope 2020

Financial System

European System of Financial Supervision, ESFS

Micro-level

NaƟonal Supervisory

Agencies

EIOPAEBAESMAJoint CommiƩee of

ESAs

Macro-level

ESRBInternaƟonal Co-operaƟon: FSB

Financial Support Programmes (EFSF, EFSM, IMF, ESM)

SGP: Stability and Growth Pact; MIP: Macroeconomic lmbalance Procedure; EIOPA: European Insurance and OccupaƟonal Pensions Authority; EBA:European Banking Authority; ESMA: European SecuriƟes and Markets Authority; ESA: European Supervisory AuthoriƟes; ESRB: European SystemicRisk Board; FSB: Financial Stability Board

Fig.2.Euroareasurveillanceprocedures–institutionaloverviewSource:Owndesign.

‘Six-Pack’:Regulation(EU)No1173/2011;Regulation(EU)No1174/2011;Regulation(EU)No1175/2011;Regulation(EU)No1176/2011;CouncilRegulation(EU)No1177/2011;CouncilDirective2011/85/EU;‘FiscalCompact’:TreatyonStability,CoordinationandGovernance;‘EuropeanSemester’:ECOFIN-CouncilPressRelease13161/10,07/09/2010,Foradetailedassessmentcf.KastropandEbert(2012).

14610

New Fiscal and Economic Surveillance System

More eﬀecƟve SGP

Besides the deﬁcit criterion, the debt criterion becomes obligatory

Obligatory reducƟon of debt, by 1/20 per year of the diﬀerence between theactual debt level and the debt level criterion

Budget must be balanced or in surplus (over the business cycle), defecƟons can besancƟoned (although the deﬁcit is below the 3%-criterion; ‘prevenƟve arm’)Euro area countries need to submit an interest free deposit 1 month aŌer theopening of an EDP (COM’s recommendaƟon can be rejected by the Council’s OM)Besides fees, the Council can cut oﬀ a country’s funding from EU funds

NaƟonal planning and reporƟng cycles synchronised; the MS’s budgets and policiesare reviewed over 6 months in order to idenƟfy emerging imbalances

New process to monitor and correct macroeconomic imbalances (focus on currentaccount balance), similar to SGP

C.Kastropetal.

EarlierQuickerMore complex

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 Europ. Semester

MIP

SGP: Stability and Growth Pact; MIP: Macroeconomic Imbalance Procedure

Fig.3.NewﬁscalandeconomicsurveillancesystemintheEuroareaSource:Owndesign.

ﬁnances).Also,theyarerarelycalculatedinaprudentmanner,e.g.withrespecttopossiblespill-overeffectsfromtherealeconomy.ThisconceptuallackisnotlimitedtothenationalbudgetoftheindividualMemberStatebutisalsovalidfortheprojectionsoftheEC.NeithertheMSnortheECshowasufﬁcientdegreeofprudencewhencalculatingGDPﬁguresorpublicdeﬁcits.Thatabsenceofaprudentcalculationnecessarilyincorporatesanelementofvulnerabilityofthepublicﬁnancesagainstnegativeshocksaspublicbudgetslackadequateroomforman-oeuvreincaseofrisksmaterializing.

Fromtheperspectiveofpoliticaleconomy,thesurveil-lanceframeworkshowssevereweaknessesastheobliga-tiontomakerisksexplicitisnotestablishedandbudgetarysurveillancelacksclearincentivestocalculate‘prudently’.AlthoughtheEuropeanSemesterstream-linedprocessesandgivestheECmoreindicativepowerinthenationalbudgetarycalculations,itisfarfromclearinwhichrespectrisksforpublicﬁnancesoftheindivi-dualMShavetobemadeexplicitorhowsafetymarginshavetobecalculatedintheprojections.TheoverrulingpoweroftheCouncilhasbeenreducedbythenewvotingrequirementofreversedqualiﬁedmajority;thustheECisnowinchargeofenhancingthepreventivemonitoringofnationalbudgetpolicies,e.g.byaskinganMStoresub-mitabudget.

Inthecorrectivearm(EDP),MemberStatesarerequiredtocommittodetailedconsolidationandadjustmentmea-sures,whichcontainelementsofprudenceagainstrisks,withcompliancebeingmonitoredbytheECandthe

MIP and the Excessive Imbalance Procedure (EIP)

Warning

Deepenedanalyses

COM analyses risksmore speciﬁcally,taking SGP reportsand ESRB

recommendaƟonsinto account

Result

In case of excessive imbalances:

EIP opening by COM and the ECOFIN CouncilCorrecƟve AcƟon Plan (CAP)

plan and implementaƟon is monitored byCOM and the ECOFIN Council

more than two defecƟons to the deadlinesor requirements will lead to sancƟons (SGP-like procedure)

Scoreboard:

idenƟfy countrieswhich indicatorvalues are higher orlower than the EUaverage; COM’sreport need to beapproved by theECOFIN Council

Fig.4.MacroeconomicsurveillanceandtheexcessiveimbalancesprocedureSource:Owndesign.

Fiscal,economicandfinancialvulnerabilities

Council.Assanctionsimposedonindividualstateswillbetriggeredinamore‘automated’way,theinstitutionalset-upshouldsubstantiallylimittheleewayforagenerousinter-pretationoftheprovisions.Nevertheless,asimilarbindingprocedureatanearlystage,wheretheriskofanegativeﬁscaltrackrecordcanbeavoided,isstillmissing.ThisiswhytheEuropeanHeadsofStateorGovernmentlaunchedtheFiscalCompact:buildinganinstitutional‘fortress’againstexactlythesepoliticaleconomyproblemsandasastepforwardtowardsaﬁscalunioninthespiritofastabilityunion.BasedonthemodelofGermany’sconstitutional‘debtbrake’,theEurocountriescommittedtoimplementarrangementsforbalancedbudgetsintheirnationallaws.Infuture,thecyclicallyadjusteddeﬁcitisnotallowedtoexceed0.5%oftheGDP.Thisshouldensurebudgetsclosetobalancewhileﬁscalpolicycanactcounter-cycli-callyandthusreduceeconomicvulnerabilities.

Takingalong-termperspective,themonitoringofrisksforﬁscalsustainabilityispartlycoveredintheEUpro-cesses.Adetailedreportingframeworkhasbeendevel-opedbytheEconomicPolicyCommittee(EPC)oftheEUtogetherwiththeEC,andtheageingaspecthasbeenintroducedintothemedium-termobjective(MTO)frame-work.Thelong-termpressureonpublicﬁnancesisaddi-tionallytriggeredbyarecurringno-containingeffectineconomicupswings.WhatwasconceptuallycorrectedinGermanybytheintroductionofacyclicallyadjustedMTO(despitestillopenissues,cf.Ebert,2013)hasunfortu-natelynotbeenimplementedinEuropecredibly.TheestablishmentofMTOsandtheirstrictenforcementoverthecycleremaininawayunﬁnished.Theintegratedmacroeconomicsurveillance

UnsustainableeconomicdevelopmentsintheEuroareademonstratedthateconomicgovernanceinEuropecannotsolelyrelyonﬁscalmonitoring.Aspartoftheso-called‘Six-pack’,theCounciltogetherwiththeECaddressedthatproblemanddevelopedanewprocessforpreventingandcorrectingmacroeconomicimbalances,takingupele-mentsoftheSGPinthedesignoftheMIP(seeFig.4).15ThenewsurveillanceandenforcementmechanismisbasedonArt.121.6oftheEUTreaty.Theprocessisframedandtriggeredbytheso-called‘alertmechanism’,whichaimsatdetectingpossiblyharmfulimbalancesandtheneedforpreventiveorcorrectiveactions.TheMIP’spreventivearmallowstheECandtheCounciltoadoptrecommendationsatanearlystage,beforeimbalancesbecomeexcessive.TheExcessiveImbalancesProcedureasthecorrectivearmcopeswiththeproblematiccases.AnAlertMechanismReportisdiscussedintheEurogrouporintheCouncilfollowedbycountry-speciﬁcin-depth

1516611

reviewsbytheECasonepartoftheintegratedsurveil-lanceundertheEuropeansemester.Atthecoreofthenewprocedureisascoreboardof10indicatorswiththresholdsindicatinginternalandexternaleconomicproblems(cf.Table6).Twoindicatorsaimatmonitoringexternalposi-tions,threecaptureeconomiccompetitivenessandthesubsequentﬁvereﬂectinternalimbalances(EC,2012).16Basedontheaverageofpastdata,anin-depthanalysisrevealsifimbalancesarepresentorlikelytooccur.

Theﬂawsoftheseprocessescanbeseeninthefactthatthemacroeconomicsurveillanceisbydeﬁnitionback-wardlooking.Thereisnoexplicitfuture-orientedviewonmacroeconomicdevelopmentsalthoughthealertmechanismissupposedtodetectimbalancesthathaveaclearlong-termdimensionearlyenoughtocounteract.And,whilethescoreboardcoverseconomic,ﬁscalandﬁnancialsectordevelopments,thespill-oversbetweenthethreespheresaremostlyneglected.Furthermore,thereisnocommonunderstandingofhowthelinkbetweenﬁnancialandmacroeconomicissuesshouldbeaddressedbysurveillanceprocesses.Finally,wefaceaseriousimplementationgapas,despitethesevereeco-nomicturbulencesintheEuroarea,theMIPinitsﬁrstyeardidnotclassifyanycountryashavingexcessiveimbalances.SuchweakpoliticalpressureatthestartoftheprocedureraisesthequestionwhethertheMIPframe-worktrulyhasthenecessarybite.

Macro-prudentialsurveillance–theroleoftheESRBAccordingtotheregulationestablishingtheESRB,

[t]heESRB’staskshouldbetomonitorandassesssystemicriskinnormaltimesforthepurposeofmitigatingtheexposureofthesystemtotheriskoffailureofsystemiccomponentsandenhancingtheﬁnancialsystem’sresiliencetoshocks.(Regulation(EU)No1092/2010,whereas(10))

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 TheESRBanalysesthecurrentmacro-ﬁnancialsituationandadvisesEuropeanandnationalbodiesonhowtofosterﬁnancialstabilityintheEU.TheBoardconsiderspublicﬁnancesandrealeconomicaspectsforthispurposeaswellasnegativeeffectsoftheﬁnancialsystemontherealeconomy.TheESRBistheEU’smacro-prudentialsuper-visorybody.ItgathersEuropeanandnationalsupervisoryauthorities,centralbanks,theEC,theEuropeanSupervisoryAuthorities(ESAs)andtheEconomicandFinancialCommittee(EFC).TheECB’spresidentisalsotheChairoftheESRB.TheECBplaysastrongrolewithintheESRB,althoughtheESRBissupposedtoconsidernotonlytheEuroareabutthewholeEU.TheESRBisdesignedtoworkindependently,thusmustnotdemand

Notallnewelementsofthatprocesscanbereviewedhere;wefocusontheelementscapturingrisksandvulnerability.Thescoreboardandinparticulartheissueofcurrentaccountsurplushadbeendiscussedintenselyamongpoliticians.

612

Table6.CoreindicatorsoftheMIP’sScoreboard(EC,2012)Three-yearbackwardmovingaverageofthecurrentaccountbalance,%GDP,threshold+6%to–4%

Netinternationalinvestmentposition,%GDP,threshold–35%Five-yearpercentagechangeofexportmarketsharesmeasuredinvalues,threshold–6%

Three-yearpercentagechangeinnominalunitlabourcost,thresholdsof+9%forEuroareacountriesand+12%fornon-Euroareacountries

Three-yearpercentagechangeoftherealeffectiveexchangeratesbasedonHICP/CPIdeﬂators,relativeto35other

industrialcountries,thresholdsof±5%forEuroareacountriesand±11%fornon-EuroareacountriesPrivatesectordebt,%GDP,threshold160%Privatesectorcreditﬂow,%GDP,threshold15%

Year-on-yearchangesinthehousepriceindexrelativetoaEurostatconsumptiondeﬂator,threshold6%Governmentsectordebt,%GDP,threshold60%

Three-yearbackwardmovingaverageoftheunemploymentrate,threshold10%Source:EC(2012).

ortakeonorders.TheESRBprovidestheESAswithrelevantmacro-prudentialinformationandreceivesrele-vantdatafromtheEuropeanandnationalsupervisoryauthorities.Beyondthat,theESRBcollectsmacro-leveldataonregionalandsectoral(e.g.betweenﬁnancialmar-ketactors,products,markets,theeconomyandpublicﬁnances)interlinkages(cf.DeutscheBundesbank,2012,29ff.).TheESRBformulatesrecommendationsandtherespectiveaddresseeneedstoinformtheESRBandtheEuropeanCouncilaboutstepstaken.TheESRB’smainworkisconﬁdential.AlthoughtheESRBissupposedtobeasupervisoryagency,itmainlyservesasanadvisorybodysinceitdoesnothaveanyenforcementinstrumentsatitsdisposal.

IV.InstitutionalFeaturesofanImproved

SurveillanceFrameworkfortheEuroAreaAsthecrisesmadeclear,vulnerabilityandriskanalysesarecrucialtodetectingunfavourabledevelopments.Europeaninstitutionsaretryingtoﬁllconceptualgapsbymoderatelyintegratingvulnerabilityconceptsintotheexistingsurveillanceprocesses.Whileﬁscal,economicandﬁnancialstabilityhavebeenaddressedbythereﬁnedandnewlyintroducedprocesses,theystillhaveconceptualshortcomingsandtheyarenotsufﬁcientlyconnected.Thefollowingconceptualelementsandinstitutionalexten-sionswouldimprovethesurveillanceprocessesanalyti-callyandincreasetheireffectiveness.Conceptualelements

TheshortcomingoftheSGPandtheMPIcouldbeaddressedbyindividuallyextendingeachoftheprocesses

C.Kastropetal.

bydeeperanalysesandbyconsideringthemcomprehen-sivelyandtogetherwithmacro-prudentialsurveillancetools.

Medium-termprojections.Both,theSGPandtheMIP,workintheshortterm,whereassustainabilityreportingislong-termoriented.Inordertocapturecurrentvulnerabil-itiesandriskswithregardtofutureprobabledevelop-ments,anadditional,medium-term-orientedstrategyisneeded.Onewaytouncovertherisksfacingﬁscalsustain-abilityinstitutionallycouldbebycreatingareportingandmonitoringframeworkinadditiontotheSGPframeworkandthesustainabilityanalysis.Suchaforward-lookingmedium-termanalysiscoveringaperiodof10–20yearswouldhavetheadvantageofbeingmorepolicyorientedthantheverylongtermsustainabilityreportingandamoreeffectiveearlywarningtoolthantheveryshorttermorientedSGP.TheECisplanningtoincorporateamed-ium-termprojectionintoitssustainabilityreport.However,integratingitintoasurveillanceprocess–andnotjustreportingaboutit–mightfosterthesurveillance’s,foremosttheSGP’s,effectiveness.

Safetymargins.Themedium-termprojectionscouldbereﬁnedbyintroducingsafetymargins.AnambitiousshiftoftheSGP’sanchor,theMTO,fromdeﬁcittosurplusrequirementsseemsindispensable.Fiscalrisks–notonlystemmingfromageingsocieties–callforaprudentsafetymargintoincreasetheresilienceofpublicbudgetsagainstfuturechallengesandshocksandinordertoaddresstheﬁscalchallengesofthedemographicchangeahead.TheMTOshouldbeorientedtowardsacyclicallyadjustedbalancedbudget.Notonlypublicdeﬁcitsbutalsodebtlevelscouldbeassessedmakinguseofsafetycon-siderationsdependingontheindividualcountry’scontext.Forexample,the60%-Maastrichtreferencevaluemightbetooweak.Safetymarginstothis60%-thresholdbasedondetaileddebtsustainabilityanalysesmayresultinallowinglowerdebttoGDPratios.Inserioustimes,adjustmentsshouldrequireevenstructuralsurplusesinordertodecreasethepublicdebtlevelatleasttotheSGP’sandFiscalCompact’s60%-threshold,toregaincredibilityandincreasescopeforactiontoprepareforfuturechallenges.Thatistrueevenmoreasthemajoreconomieswillfaceadramaticpressureonpublicdebtevenundersigniﬁcantbudgetconsolidationscenariosfol-lowingthecurrentSGPrules(DBResearch,2011).Inthatcontext,itshouldbeensuredthateconomicandﬁscalforecastsareconductedbymoreprudentcalculations(lowerconﬁdencebounds,referredtoassafetymargins).Anearlywarningmechanism.Thetwoproposalscouldtranslateintoanearlywarningmechanism.ThismechanismcouldbuildontheworktheECundertakesregardingﬁscalvulnerabilitiesandtheenhancementofthe

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 Fiscal,economicandfinancialvulnerabilities

IMF’sEWEforEuropeanpurposes.FiscalsustainabilityshouldbeatthecoreofthenewmechanismtoeffectivelycomplementtheEC’scurrentsurveillancemandateforpublicﬁnancesandeconomicimbalances.Themechan-ismcouldaddﬁnancialandrealeconomicindicatorstotheanalysesinordertoassessvulnerabilitiesandrisksstem-mingfromtheseareasforthepublicﬁnances’sustainabil-ity.Also,themechanismcouldbeenrichedbycontagionandspill-overmodelssimulatingthematerializationofrisksinspeciﬁccases,andbymodelsthatcarryoutamoreprofoundriskanalysisforcertainimportantriskareas,suchastheﬁnancialsector.Acountry-speciﬁcapproachbytheECcouldalsoinﬂuencethedeterminationofcountry-speciﬁcsafetymarginsandcountry-speciﬁcmaximumdebtlevelsallowedintheSGP.Hereby,theECshouldespeciallydifferentiatebetweenthedifferentchallengesandresponsibilitiesofthosecountriesthathavetheEuroincontrasttothosewhohavenot.Itcouldbediscussedwhetherresultsshouldbemadepublicornot.Ontheonehand,someofthedatausedareconﬁdential;ontheotherhand,onlypublishedinformationwilleffectivelyworkaspeerpressure.

Copewithspill-overs.TheEuroareaeconomiesfacestrongspill-overeffects,notonlyfromtherealeconomybutevenmorefromtheeffectsoftheﬁnancialsectoronthegeneraleconomyandontheﬁscalsector.Therefore,itiscrucialtoimplementmechanismsthatexplicitlyaddresstheseaspects.Inordertokeepaclear-cutmandate,theSGPisnotsupposedtoincorporatesuchanalyses.TheMIPalreadytriestoassesseconomicspill-overeffects.However,itfocussestoomuchoncurrentaccountimbal-ances.Sofar,spill-overeffectsbetweenthethreemen-tionedareasarehardlycaptured;anearlywarningmechanismandrelatedsimulationscouldmakeupforpartofthat.Further,aprocessshouldbeestablishedthatlinkallindividualprocessesconductedbythedifferentinstitutions,includingmacro-andmicro-prudentialsuper-vision.UndertheEuropeanSemester,representativesoftherespectiveinstitutionsshouldconductstresstestingandcontagionmodelsimulationsonaregularbasis.Resultsshouldtranslateintoinstitution-andcountry-speciﬁcrecommendations.Inordertokeepresultsandrecommendationsasfrankaspossible,resultsshouldnotbemadepublic.Whetherrecommendationshavebeentakenintoaccountshouldbeevaluatedintheindividualsurveillanceprocesses.

Institutionalreformcomponents

Europeancommitteeonsupervisorydataanalysis(supervisorycommittee).Theconceptuallackofcon-sideringspill-overeffectsismirroredbytherespectiveinstitutionalshortcomings:whileproceduresandrelatedinstitutionsavoidtakingspill-overeffectsintoaccount,

613

onlyanintegratedapproachconnectingallsurveillanceprocesseswouldbeabletoaddressvulnerabilitiesandrisksintheEuroareaservingasa‘fortress’againstfuturecrises.Therefore,aEuropeanCommitteeonSupervisoryDataAnalysisshouldcomplementallsurveillancepro-cessesasatechnicaladvisorycommittee,conductingtherelevantanalysesandsupportingtherespectiveinstitu-tionsasanadvisorycommittee.Thecommitteeanditsmembersshouldbepoliticallyindependent.Membersbeingappointedfor,e.g.sixyears(max.twoterms),bytheresponsibleEuropeaninstitutionsshouldhaveastrongdataanalysisbackgroundandbesupportedbyanade-quatelylargestaffedsecretariat.

TheCommitteewouldconductdifferenttypesofana-lysesonﬁscalsustainability,bothshort-andlong-term.MostofitsworkwouldtargetanalysesregardingEuropeanlevelsupervisoryschemesliketheSGPandMIP,buttheCommitteecouldalsobechargedwithmacro-prudentialanalysessupportingtheESRBorwithexamin-ingEuropeangoalssuchasoftheEurope2020strategy.Thereby,asregardsthestructureinFig.2,theCommitteeshouldbeinstitutionallyindependentfromexistingpro-cessesbutcansupportallofthembydataanalyses.Itwouldbeasimpleadvisorybody,hence,therespectiveEuropeaninstitutionswouldkeeptheresponsibilitytodecideupontheuseoftheanalyses’resultsandthefor-mulationofrespectiverecommendations–e.g.regardingtheSGPandMIPandthedeﬁnitionofexcessivedeﬁcitsandimbalances.Nonetheless,theCommitteeshouldmakeresultspublic(e.g.SGPandMIPforecasts)andtherebyimplicitlyputpressureontheECandthenationalgovern-mentstotakethemintoaccount.Onlypublishedinforma-tionorthethreatofinformationbecomingpubliccoulddisciplinecountriestoactaccordingtotherules.Inordertodevelopthenecessarydesignfeaturesofsuchanewsurveillanceinstitution,wecanbeneﬁtnotonlyfromtheexperiencesobtainedinHungary,whereanindependentFiscalCouncilwaschairedbyGeorgeKopits(2012;cf.DebrunandTakahashi,2011;Nyikos,2013),butalsofromotherindependentbodies,suchasintheNetherlandsorSweden,whichhelptocontrolpublicexpenditure.Integratedsurveillanceframework.Aspointedoutinthesectionabove,anintegratedapproachisneededtoeffectivelycapturespill-overeffectsandtherelatedthebuild-upofvulnerabilitiesandrisks.Therefore,allrele-vantinstitutionsshouldconveneonaregularbasisandexchangeinformationandevaluationsoftheirrespectiveﬁeldsofaction.TheEuropeanSystemofFinancialSupervision(ESFS)couldserveasanexample.Moreover,tocomplementthesupervisionrelatedtoﬁnan-cialvulnerabilitiesandrisks,amicro-prudentialsupervi-sorybodyaspartofapossiblebankingunioncouldbeestablished.Also,thiswouldprovidemoreinformationonrealeconomicdevelopmentsandregionaldispersionsofa

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 614

ﬁnancialinstitution’srisksduetofundingofpublicbodies.Thiscouldfostertheassessmentofspill-overeffectsbetweencountriesandamongtheﬁscal,ﬁnancialandeconomicﬁeldsandhelptodetectcontagionchannelsandrelatedvulnerabilitiesandrisks.Suchanintegratedframework,atleastwhenitcomestoassessingfuturerisks,couldleavetheestablishedcorrectivearmsuntouchedasitmightbeappropriatetoleavetheprocessesseparatewhileassessingpossiblefuturerisksinamorecomprehensivemanner.

V.Conclusion

TheEuropeanconcepts,institutionsandprocesseshavetoensurethatnotonly‘expectedrisks’butalsounlikelyorunknownrisksassociatedwithaglobalized,highlyinte-gratedworldorrapidlyevolvingcontagionriskscanbedealtwith.Thecrucialtaskofsuchanextremescenariotreatment,prominentlydescribedbyTaleb(2010),istobuildrobustsystemsandbeingabletoexploitpositiverisks.Astheﬁnancialandsovereigndebtcrisishasshown,ﬁnancialmarkets,therealeconomyandnottheleastpublicﬁnances,areveryvulnerabletohazardousBlackSwaneventsandexposedtowelfarelossesbeyondthosepredictedinstandardmodels.

Atthesametime,itisquiteobviousthattherewillneverbeacomprehensiveearlywarningframeworkoverseeingallfactorsandtheirinterplaythatpreventsﬁnancial,macroeconomicandsovereigndebtcrises.However,thecurrentframeworkcanbeimproved,andtherearenowelementsavailablethatcouldservemuchbetterasearlywarninginstruments.WhentheSGPwasdesignedinthelatenineties,itsdesignwassolelyfocussedonﬁscalstability.Somecountrieschosethispathsuccessfully,butonlyuntilthecrises.Thebasicthinkingwasthatrequiringﬁscalstabilitywouldmotivaterelatedpolicies,suchasstructuralreforms.Consideringonlythedeﬁcitcriterionandneglectingthedebtcriterionandothermacroeco-nomicandﬁnancialmarketindicators,shapedanarrowunderstandingofwhatinﬂuencesﬁnancialstability.Atleastnow,politiciansknowthatallthementionedele-mentsplayarole,andthatthesettingofallthreediffersbetweencountries.Accordingly,thecurrentEMU’sinsti-tutionalframeworkhastobeenhancedbysomeinstitu-tionalelements.Apartfromthat,methodsandmodelsshouldbecontinuallyassessedandimproved.Betterwaystoassessdataandtodeﬁneindicatorsneedtobefound.Considerationofpoliticaleconomyandeffectivecommunicationdemandsthatmethodsandprocessesbekeptsimpleandtransparent.Inanycase,methodologyshouldnotsticktoanideologicalschool–suchasneo-classicalorKeynesianconcepts–butshould‘useanyrodtocatchtheﬁshnotdiscussingwhethertherodhastobewoodorKevlar’.Furthermore,itwouldbeenrichingto

C.Kastropetal.

ﬁndawaytokeeptheinstitutionaldesignopen,asa‘self-learning’structure,sothatitadaptseasilytochanginginitialconditionswhilestayingthesameduringdifferent‘seasons’.Alotmorework,especiallyregardinginstitu-tionaldesigns,shouldbeundertaken.

Acknowledgements

TheauthorsthanktheparticipantsoftheBdFconferenceandinparticularAntónioAfonso,RüdigervonKleistandWilliamBruntonforfruitfulcommentsonthesubject.Theopinionsexpressedinthisarticlearetheauthors’personalonesanddonotnecessarilyreﬂectthepositionsoftheGermanFederalMinistryofFinance.

References

Baldacci,ﬁE.,McHugh,J.andPetrova,I.(2011a)Measuring

cators.scalvulnerabilityIMFWorkingandPaperﬁscal11/94,stress:IMF,aproposedWashington,setofDC.indi-Baldacci,ﬁE.,Petrova,I.,Belhocine,N.etDC.

scalstress,IMFWorkingPaper11/100,al.(2011b)IMF,Washington,Assessing

Baum,A.,Checherita-Westphal,Ch.andRother,Ph.(2012)

Debtandgrowth–newevidencefortheEuroarea.ECBWorkingPaperSeries1450,ECB,FrankfurtamMain.BIS,FSBandIMF(2011)Macroprudentialpolicytoolsand

frameworks.ProgressReporttoG20,BIS,FSBandIMF,GenevaandWashington,DC.

Campolongo,F.,Marchesi,M.anddeLisa,R.(2011)The

potentialimpactofbankingcrisesonpublicﬁnances:anassessmentofselectedEUcountriesusingsymbol,OECDJournal:FinancialMarketTrends,2,73–84.

Cottarelli,C.(2011)Theriskoctagon:acomprehensiveframe-workforassessingsovereignrisks.PresentationattheSapienzaUniversityinRomeonJanuary25,2011andatPoliteiainLondononJanuary26,2011.

DBResearch(2011)Staatsverschuldungin2020–Eine

TragfähigkeitsanalyseFürIndustrie-UndSchwellenländer.DeutscheBank,Frankfurt/Main.

DeLisa,R.,Zedda,S.,Vallascas,F.etal.(2010)Modeling

depositinsuranceschemelossesinabasel2framework,JournalofFinancialServicesResearch,38,123–41.

Debrun,X.andTakahashi,K.(2011)Independentﬁscalcouncils

incontinentalEurope:oldwineinnewbottles?.InCESifo,DICEReport9/3,pp.44–9.

DeutscheBundesbank(2012)MonatsberichtApril2012,

DeutscheBundesbank,Frankfurt/Main.

EC(2009)SustainabilityReport2009.EuropeanEconomy9/

2009.

EC(2011)PublicﬁnancesinEMU2011.EuropeanEconomy3/

2011.

EC(2012)Scoreboardforthesurveillanceofmacroeconomic

imbalances.EuropeanEconomyOccasionalPapers92.ECB(2010)FinancialStabilityReviewJune2010,ECB,

Frankfurt/Main.

ECB(2011a)FinancialStabilityReviewJune2011,ECB,

Frankfurt/Main.

ECB(2011b)FinancialStabilityReviewDecember2011,ECB,

Frankfurt/Main.

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013 Fiscal,economicandfinancialvulnerabilities

ECB(2012)FinancialStabilityReviewJune2012,ECB,

Frankfurt/Main.

Ebert,W.(2013)ErsteErfahrungenundWeiterentwicklungder

SchuldenbremseinDeutschlandundEuropa,inSchuldenregelnAlsGoldenerWegZurHaushaltskonsolidierunginDerEU?,Eckardt,M.andPallinger,Z.(Eds),SchriftenreihederAUB,Budapest,pp.74–104.

IMF(2010)TheIMF-FSBEarlyWarningExercise–Designand

MethodologicalToolkit,IMF,Washington,DC.

Kaminsky,G.,Lizondo,S.andReinhart,C.M.(1998)Leading

indicatorsofcurrencycrises,IMFstaffpapers,45/1,IMF,Washington,DC.

Kaminsky,G.andReinhart,C.M.(1999)Thetwincrises:the

causesofbankingandbalance-of-paymentsproblems,AmericanEconomicReview,,473–500.

Kastrop,C.andEbert,W.(2009)GoverningtheEuroareainthe

nextdecade:assessmentandchallengesahead,inGoverningtheEurozone,Caesar,R.etal.(Eds),StiftungWissenschaftundPolitik,Berlin,pp.51–61.

615

Kastrop,C.andEbert,W.(2012)ClosingtheapsoftheSGP-whyasovereigndebtrestructuringmechanism?reﬂectionsfromapoliticaleconomyperspective,inRulesandInstitutionsforSoundFiscalPolicyAftertheCrisis,Bancad’Italia,Rome,pp.259–75.

Kopits,G.(2012)Canﬁscaldisciplinebereconciledwithﬁscal

sovereignty?,inRulesandInstitutionsforSoundFiscalPolicyAftertheCrisis,Bancad’Italia,Rome,pp.387–407.Kumar,M.S.andWoo,J.(2013)Publicdebtandgrowth,inFiscal

PolicyandGrowth,Bancad’Italia,Rome,pp.173–208.Nyikos,G.(2013)FiskalregelnalsInstrumentefüreinennach-haltigenHaushaltinUngarn,inSchuldenregelnAlsGoldenerWegZurHaushaltskonsolidierunginDerEU?,Eckardt,M.andPallinger,Z.(Eds),SchriftenreihederAUB,Budapest.

Schaechter,A.etal.(2012)Atoolkittoassessingﬁscalvulner-abilitiesandrisksinadvancedeconomies,IMFWorkingPaper12/11,IMF,Washington,DC.

Taleb,N.N.(2010)TheBlackSwan:TheImpactoftheHighly

Improbable,RandomHouse,NewYork.

Downloaded by [UNIVERSITY OF ADELAIDE LIBRARIES] at 22:48 08 December 2013

因篇幅问题不能全部显示，请点此查看更多更全内容

查看全文