Local view for "http://purl.org/linkedpolitics/eu/plenary/2007-09-05-Speech-3-182"
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"en.20070905.21.3-182"2
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"(
Mr President, ladies and gentlemen, in recent weeks there has been serious turbulence in the financial markets, initially caused by the deterioration in the US sub-prime mortgage market.
Thanks to all this, companies are enjoying positive results, which should enable them to cope with any tightening of credit without having to significantly review their investment and growth plans. In short, ladies and gentlemen, there is no doubt that, given that one of the risks of decline which we had been warning about for some time when we published our economic forecasts – risks of a decline in the US mortgage market and its impact on the US economy – has materialised, growth this year and next year in the European Union and in the euro area is not going to exceed our forecasts given in May this year.
Nevertheless we have good reason to remain confident about the foundations of the European economy and its capacity to overcome the current turbulence. Next Tuesday, 11 September, on behalf of the Commission, I will publish the interim growth forecasts for 2007 both for the euro area and the EU, which will give us an initial indication of the possible impact of the crisis.
On the same day I will have the opportunity to present these forecasts to you when I appear before the Committee on Economic and Monetary Affairs. The forecasts for 2008 and beyond, as you know, will have to wait until we publish our economic forecasts in November, as usual.
This deterioration extended to all the financial markets via securities and financial products supported by those mortgages, which, in recent years, have been acquired in large quantities by financial institutions almost throughout the world.
If we look at corrections to stock markets over recent weeks, they have not been greater than previous market corrections over the last two years; however, what happened recently is unusual in that it gave rise to a liquidity crisis in the interbank markets, which obliged the central banks to inject large amounts of money. The liquidity problems are clearly linked to a decline of confidence owing to a lack of information on the global exposure of market operators to the products linked to North American high-risk mortgages.
The impact of this turbulence could go beyond what we have seen so far and it therefore demands our full attention and fully justifies today’s debate. It is still too early to quantify the consequences of this crisis on the real economy.
The final impact will depend principally on three factors. Firstly, we will have to see what direct impact the deterioration in the North American housing market has on the overall US economy, although there is no doubt that it will be negative, and US growth will be lower than predicted up till now. Given the influence of the US economy on the wider global economy, a slowdown in growth in the United States will have some impact on the rest of the world, in particular, on European economies. This impact should, in principle, be limited, in our case, as EU countries mainly trade within the EU. Moreover, the global economy continues to enjoy a high rate of growth, thanks to the dynamism of the emerging countries, among others. Emerging countries have certainly not been greatly affected by this crisis.
The second relevant factor when evaluating the possible impact of the financial turbulence is the changes in financing conditions for businesses and households. We are already seeing a re-evaluation of risk premiums to bring them more into line with the real assessment of that risk. This is correcting a situation in which the abundance of liquidity had led to a degree of relaxation of risk assessment. This has positive aspects, but if financing conditions were to be tightened beyond certain limits, economic activity would undoubtedly be affected by the reduced availability of capital.
The third factor, which is probably the most important and most difficult to predict, will be the impact on confidence. Confidence is a key driver of investment and purchase decisions, but unlike the previous factors, it is a subjective value that is based on the overall messages, perceptions and information received by economic operators. Among others, these include messages from the public authorities, whether national governments, parliamentary representatives or international organisations.
I therefore think that this debate is a good opportunity, not only to assess the direct consequences of what has happened on the markets in recent weeks, but also to recall and emphasise the fact that the European economy continues, as the representative of the Council has just said, to have solid foundations, which should not be significantly affected by the recent turbulence and that therefore our economy is in a good position to overcome the uncertainties that have arisen.
As I said before, the global economy is still extremely dynamic, and thanks to this there is still a trade surplus in the external sector of our economy, as demonstrated by the latest statistics published by Eurostat. Investment, in particular in capital goods, remains at high levels, supporting current economic activity and anticipating future improvements in productivity. Private consumption is benefiting from sustained job creation, so that our latest statistics show an unemployment rate in the euro area and in the EU that is almost comparable to historical lows: in the case of the euro area, unemployment is below 7%. Inflation remains stable."@en1
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