ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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In the remaining non-euro area EU countries(i.e. Bulgaria, the Czech Republic, Denmark,Hungary, Poland and Slovakia), budgetaryoutcomes for 2008 were broadly in line with orbetter than the convergence programme targets.In a generally deteriorating economic andfiscal environment, Slovakia, Sweden andthe United Kingdom planned or implementedfiscal stimulus packages towards the end of2008, whereas several other non-euro area EUMember States announced plans for – in somecases ambitious – fiscal consolidation in 2009.Latvia and Hungary, which received emergencyfinancial support from, among others, the EUand the IMF, committed to sizeable fiscalconsolidation packages for 2009 and beyond.At the end of 2008, Hungary and theUnited Kingdom were subject to excessivedeficit procedures. The ECOFIN Councilabrogated the excessive deficit proceduresfor the Czech Republic and Slovakia in Juneand for Poland in July. In June Romania receivedpolicy advice from the European Commissionin view of the risk that it would breach the3% of GDP deficit ceiling in an environment ofstrong GDP growth.The government debt ratio remainedsubstantially below the 60% of GDP referencevalue in 2008 in most non-euro area EU MemberStates, with only Hungary recording a debt ratioabove 60%. However, developments differedsignificantly across countries. The debt ratioincreased in Denmark, Estonia, Latvia, Hungary,Poland, Romania and the United Kingdom,while it declined or was broadly unchanged inthe other countries. Increases in the debt ratio inmost countries reflect mainly the deteriorationin GDP growth and in the budget balance. Forthe United Kingdom the increase in the debtratio relates to some extent also to the budgetaryimpact of emergency support provided tofinancial institutions. In the case of Denmark,the increase reflects bond issuance in excess ofthe funding requirement.BALANCE OF PAYMENTS DEVELOPMENTSThe combined current and capital accounts ofthe non-euro area EU Member States continuedto vary considerably across countries in 2008Table 9 Balance of payments of the non-euro area EU Member States and the euro area(as a percentage of GDP)Current andcapital account balance Net direct investment Net portfolio investment2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008Bulgaria -11.3 -17.1 -20.6 -22.7 14.7 23.3 21.8 18.0 -4.7 1.3 -1.6 -2.4Czech Republic -1.2 -2.3 -1.2 -1.4 9.4 2.8 4.5 4.9 -2.7 -0.8 -1.5 1.3Denmark 4.5 2.9 0.7 1.6 -1.3 -2.1 -2.8 -3.6 -4.5 -6.3 -2.0 -6.2Estonia -9.2 -14.6 -16.9 -10.5 15.7 4.2 5.3 5.5 -16.0 -8.0 -2.4 0.5Latvia -11.2 -21.3 -20.6 -13.0 3.6 7.5 6.7 4.4 -0.8 0.2 -2.3 1.2Lithuania -5.8 -9.5 -12.8 -12.4 2.6 5.1 3.6 2.5 -1.0 -0.8 -0.8 0.7Hungary -6.7 -7.1 -5.1 -5.7 5.0 1.0 3.2 1.7 3.9 5.5 -1.6 1.7Poland -0.9 -2.1 -3.6 -3.7 2.3 3.1 4.3 2.8 4.1 -0.9 -1.2 0.7Romania -7.9 -10.5 -13.1 -13.2 6.6 8.9 5.8 6.3 1.0 -0.2 0.4 -0.2Slovakia -8.5 -7.8 -4.7 -5.2 4.8 7.5 3.8 2.8 -2.0 2.9 -1.0 1.3Sweden 7.0 7.8 8.4 8.0 -4.5 0.6 -3.7 2.0 -0.1 -5.2 2.2 -2.0United Kingdom -2.5 -3.4 -2.7 -1.3 4.4 2.6 -2.7 -2.8 -1.5 1.1 8.4 20.5EU9 1) -4.1 -5.5 -5.5 -5.6 5.9 4.4 4.9 4.0 0.7 0.7 -1.2 0.9EU12 2) -1.0 -1.8 -1.5 -0.8 3.1 2.4 -1.1 -0.6 -1.0 -0.4 4.5 10.7Euro area 0.3 0.2 0.6 -0.2 -2.6 -1.9 -1.0 -1.9 1.6 3.5 1.5 1.6Source: ECB.Note: Data for 2008 refer to the sum of the four quarters up to the third quarter of 2008.1) The EU9 aggregate comprises the nine non-euro area EU Member States that joined the EU on 1 May 2004 or 1 January 2007.2) The EU12 aggregate comprises the 12 non-euro area EU Member States as at 31 December 2008.ECBAnnual Report200889
(see Table 9). While Denmark and Swedenreported surpluses, all other countries recordeddeficits. For many of the countries that joinedthe EU in 2004 or later, deficits are a normalfeature of the catching-up process, to theextent that they reflect favourable investmentopportunities and inter-temporal consumptionsmoothing. However, the very large current andcapital account deficits in some non-euro areaEU Member States were also driven by buoyantdomestic demand, benign global financingconditions and strong credit growth. The globalfinancial turmoil in 2008 and its spillover tothe real economy led to cooling or contractingdomestic demand, thereby contributing to anarrowing of the deficit in several non-euro areaEU countries.Looking at the high-deficit countries, thecontraction in the current and capital accountdeficit was the most pronounced in Estoniaand Latvia, even though the deficits recordedby those countries remained very large at theend of 2008. In Lithuania the deficit narrowedto a significantly lesser extent and in Romaniait remained broadly unchanged, while Bulgariarecorded a further increase. In all the abovecountries the deficit continued to exceed 10% ofGDP, with the Bulgarian deficit at over 20%.As regards countries with lower external deficits,only the United Kingdom witnessed a contractionin its deficit in 2008. In the Czech Republic andPoland the deficit was broadly unchanged, whilein Hungary and Slovakia it increased somewhat.The external imbalances in most countriesoriginated from a deficit in goods trade, exceptin the Czech Republic, Hungary and Slovakia,where the deficit in the income balance wasthe most important factor. In comparison with2007, net direct investment inflows decreased insome countries in 2008. Most non-euro area EUMember States recorded a deficit in the basicbalance, i.e. the sum of the combined currentand capital account and the direct investmentbalance, which exceeded 4% of GDP in severaleconomies. Net portfolio investment flows werenegative or broadly neutral in all non-euro areaEU Member States in 2008, with the exceptionof the United Kingdom. Net “other investment”flows continued to be largely positive in mostcountries that joined the EU in 2004 or later,reflecting mainly loans from foreign-ownedparent banks to their subsidiaries in the region.EXCHANGE RATE DEVELOPMENTSExchange rate developments in the non-euroarea EU Member States in 2008 were stronglyinfluenced by the exchange rate regimes of theindividual countries.The currencies of Denmark, Estonia, Latvia,Lithuania and Slovakia participated in ERM II.They were subject to a standard fluctuationband of ±15% around their central rates againstthe euro, except for the Danish krone, witha narrower band of ±2.25% (see Chart 38).ERM II participation is, in some cases,accompanied by unilateral commitments onthe part of the countries concerned to maintainnarrower fluctuation bands. These unilateralcommitments place no additional obligationson the ECB. In particular, it was agreed that theChart 38 Developments in ERM II(daily data; deviation from the central rate in percentage points)30-3-6-9-12DKKLVLLTLSKKEEK-15-15Jan. Apr. July Oct. Jan. Apr. July Oct. Jan.2007 2008 2009Source: ECB.Notes: A positive (negative) deviation from the central rateagainst the euro implies that the currency is on the weak (strong)side of the band. For the Danish krone, the fluctuation band is±2.25%; for all other currencies, the standard fluctuation band of±15% applies. However, on the basis of unilateral commitments,the fluctuation band for the Latvian lats is ±1%, and for boththe Lithuanian litas and the Estonian kroon a currency boardarrangement is maintained. The central rate of the Slovak korunawas revalued by 8.5% on 16 March 2007 and by 17.6472% on29 May 2008.30-3-6-9-1290 ECBAnnual Report2008
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EN2008EUROPEAN CENTRAL BANK ANNUAL
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© European Central Bank, 2009Addre
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CHAPTER 4FINANCIAL STABILITY AND IN
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7 Statistical accounting consequenc
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ABBREVIATIONSCOUNTRIESOTHERSBE Belg
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in the course of the year, in line
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currencies, T2S will be a major ste
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CHAPTER 1ECONOMICDEVELOPMENTS ANDMO
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Chart 1 ECB interest rates and mone
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Despite moderating, the annual grow
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substantial downward revisions in r
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in July, annual inflation in the OE
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As regards the Chinese economy, rea
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generally tighter financing conditi
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were recorded in December, but thes
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was driven mainly by developments i
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market tensions, particularly for l
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anking and financial system. At the
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cash flows to compensate for a redu
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Page 42 and 43: whereby investors’ uncertainty su
Page 44 and 45: September onwards, amid the great u
Page 46 and 47: Chart C Trading volumes for governm
Page 48 and 49: sponsored rescue plans were initiat
Page 50 and 51: The annual growth rate of consumer
Page 52 and 53: end of 2007. By December 2008 this
Page 54 and 55: calculated as the balance between g
Page 56 and 57: commodity prices (see Box 4). Conve
Page 58 and 59: Chart D Longer-term inflation expec
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Page 62 and 63: productivity slowed to 0.2% in the
Page 64 and 65: Table 3 Composition of real GDP gro
Page 66 and 67: Corporate investment, which had exp
Page 68 and 69: Box 5LABOUR MARKET DEVELOPMENTS IN
Page 70 and 71: Chart C Breakdown of employment gro
Page 72 and 73: Box 6DEVELOPMENTS IN THE ISSUANCE A
Page 74 and 75: Chart B Government bond yield sprea
Page 76 and 77: Box 7STATISTICAL ACCOUNTING CONSEQU
Page 78 and 79: warranted because of the need to co
Page 80 and 81: sharp depreciation of the euro was
Page 82 and 83: prices in the first eight months of
Page 84 and 85: focused more on the production rath
Page 86 and 87: segments and, in turn, affected eur
Page 88 and 89: and Bulgaria registered robust grow
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Page 94 and 95: Table 10 Official monetary policy s
Page 96 and 97: the Bank of England and Sveriges Ri
Page 98 and 99: CHAPTER 2CENTRAL BANKOPERATIONSAND
Page 100 and 101: Box 10MONETARY POLICY OPERATIONS DU
Page 102 and 103: Chart A Liquidity supply through op
Page 104 and 105: franc funding needs of banks with n
Page 106 and 107: MINIMUM RESERVE SYSTEMCredit instit
Page 108 and 109: with the ample allotments in the fi
Page 110 and 111: 2008. By contrast, the average shar
Page 112 and 113: and SDR holdings increased by aroun
Page 114 and 115: and the ECB). As a result of carefu
Page 116 and 117: cross-CSD settlement. T2S will thus
Page 118 and 119: ELIGIBLE LINKS BETWEEN NATIONAL SEC
Page 120 and 121: Chart 48 Number of euro banknotes i
Page 122 and 123: 3.3 BANKNOTE PRODUCTION AND ISSUANC
Page 124 and 125: 4 STATISTICSThe ECB, assisted by th
Page 126 and 127: iii) payments statistics and iv) de
Page 128 and 129: 5 ECONOMIC RESEARCHThe main functio
Page 130 and 131: were organised to disseminate resea
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Page 134 and 135: on the Banque centrale du Luxembour
Page 136 and 137: standards by individual Eurosystem
Page 138 and 139: CHAPTER 3ENTRY OF SLOVAKIAINTO THE
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Table 13 Main economic indicators f
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As of January 2009 Slovakia is thus
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3 OPERATIONAL ASPECTS OF THE INTEGR
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4 THE CASH CHANGEOVER IN SLOVAKIATH
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Willem F. Duisenberg accepting the
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1 FINANCIAL STABILITYThe Eurosystem
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With regard to merger and acquisiti
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with the principles set out in Octo
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2.2 BANKINGCAPITAL REQUIREMENTS DIR
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3 FINANCIAL INTEGRATIONThe Eurosyst
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The market for short-term paper in
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de France and the Banca d’Italia.
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and the Eurosystem’s business con
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4.2 RETAIL PAYMENT SYSTEMS ANDINSTR
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for Clearing and Settlement, and th
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Willem F. Duisenberg at his farewel
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1 EUROPEAN ISSUESIn 2008 the ECB co
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for financial institutions, to faci
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1.3 DEVELOPMENTS IN AND RELATIONS W
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On a number of occasions in 2008, t
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countries have voiced support for t
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Former Italian President Carlo Azeg
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1 ACCOUNTABILITY VIS-À-VIS THE GEN
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implementation of the steps foresee
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CHAPTER 7EXTERNALCOMMUNICATION
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2 COMMUNICATION ACTIVITIESThe ECB a
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Panel at the Fifth ECB Central Bank
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1 DECISION-MAKING BODIES AND CORPOR
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Council decided on the main aspects
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1.3 THE EXECUTIVE BOARDThe Executiv
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1.4 THE GENERAL COUNCILThe General
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The Eurosystem/ESCB committees have
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members of the Executive Board. 13
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for their current position. On the
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statistical office (Statistisches B
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4 ANNUAL ACCOUNTS OF THE ECB212 ECB
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function, and by the Governing Coun
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BALANCE SHEET AS AT 31 DECEMBER 200
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PROFIT AND LOSS ACCOUNT FOR THE YEA
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mid-market prices on 30 December 20
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The defined benefit obligation is c
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NOTES ON THE BALANCE SHEET1 GOLD AN
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Eurosystem (see “Banknotes in cir
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(see “Banknotes in circulation”
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values at which the transactions we
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15 CAPITAL AND RESERVESCAPITALPursu
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epresenting the remainder of its ca
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NOTES ON THE PROFIT AND LOSS ACCOUN
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individual circumstances. Basic sal
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5 CONSOLIDATED BALANCE SHEET OF THE
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ANNEXES
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Number Title OJ referenceECB/2008/1
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Number Title OJ referenceECB/2009/1
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Number 2 Originator SubjectCON/2008
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Number 4 Originator Subject OJ refe
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oth the marginal lending facility a
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OVERVIEW OF THE ECB’S COMMUNICATI
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y the respective NCBs will also be
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OPEN MARKET OPERATIONS BY CURRENCYE
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USD operationsType oftransaction 1)
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DOCUMENTS PUBLISHED BY THEEUROPEAN
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95 “Financial stability challenge
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1012 “Petrodollars and imports of
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GLOSSARYThis glossary contains sele
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Economic analysis: one pillar of th
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Financial stability: condition in w
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MFIs (monetary financial institutio
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Reserve base: the sum of the eligib
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ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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