1qGLG9p

58 Deleveraging, What Deleveraging
The euro periphery: The worst legacy
If the aggregate Eurozone is a source of concern on account of the still high
leverage ratios, the limited progress in deleveraging the financial sector, the
negative impact of the associated credit crunch and the severe impact of the crisis
on the real economy, all these problems look worse again in relation to the euro
periphery. Indeed, the legacy of the two recent crises already experienced since
2008 means a chronic liability and economic slack overhang that will hamper
macro-financial performance in the coming years. It also means vulnerability to
any future spike in international funding conditions, given the major rollover
exposures faced by these countries. The output losses since 2008 show completely
different dynamics between the core and the periphery (Figure 4.17). Indeed, as
shown in the chart, while German output is by now well above 2008:Q1 levels,
and in France it has recovered the loss, in Greece it is about 25% below, in Italy
about 9% below, and it is still well below in the other peripheral countries.
Figure 4.17 Eurozone and selected member countries’ output levels
104
100
96
92
EMU GDP (Q1 08 = 100)
88
84
EMU
Spain
Italy
Portugal
80 Germany Ireland
Greece
France
76
08 09 10 11 12 13
Source: Authors’ calculations based on national accounts data.
As shown in Figure 4.18, the divergent core and periphery dynamics reflect,
amongst other factors, a much more severe credit crunch, especially after 2011
(see the previous section). Figure 4.19 and Table 4.3 show the leverage dynamics
and the sectoral composition of debt for selected European economies.