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Case studies 51
The US economy started a recovery by the third quarter of 2009 (according to
the NBER), the fiscal deficit started shrinking by 2010 and US household assets
started rebounding by the second half of 2011, while liabilities kept falling until
2013. In the Eurozone, the recovery started at the same time (according to CEPR),
but household assets remained stable while liabilities kept increasing, private
saving decreasing and public saving increasing (all relative to GDP). In the third
quarter of 2011, the Eurozone entered a second recession. These facts suggest
that, although Eurozone households entered the crisis in a more solid balance
sheet position, their net worth deteriorated as a consequence of the protracted
weakness of the real economy and conservative fiscal policy. If another global
recession were to hit in the next few years, it will find Eurozone households in a
more vulnerable situation than in 2008.
Non-financial corporations. In Chapter 2, we showed that non-financial
corporations in the Eurozone built up liabilities before the crisis and, since then,
have adjusted very little. From Figure 4.9, however, we can detect an adjustment
in their savings behaviour. Indeed, non-financial corporations moved from a precrisis
position of persistent negative savings to one of positive or zero savings.
This adjustment is likely to reflect a situation of prolonged uncertainty that led
to a decline in the investment rate (from 22.7% in 2007 to 19.2% in 2013). This
contrasts with the US, where the savings behaviour of the corporate sector has
been less persistent.
The financial sector and the role of the ECB. Figure 4.10 shows the asset-to-GDP
ratios of financial corporations by category, where banks are labelled as ‘Other
MFI’. 20 Notice that the decline in the banks’ asset-to-GDP ratio that started in
2012 was partly offset by the increase for other financial intermediaries (OFI). 21
The total size of the balance sheet of Eurozone financial intermediaries is still not
much different from before the crisis.
20 MFIs are monetary financial intermediaries and include the European Central Bank, national central
banks, credit institutions and money market funds.
21 OFI are intermediaries other than banks, pension funds, insurance or money market funds. They
include corporations engaged in financial leasing, financial vehicles which are holders of securitised
assets, financial holding corporations, dealers in securities and derivatives (when dealing for their own
account), venture capital corporations and development capital companies.