Hypostat 2015

Housing and Mortgage Markets in 2014
The aggregate figures though fail to fully explain the diverging paths of the EU
Member States. In chart 3 we see that different countries tell different stories: from
Ireland that posted a bold 5% GDP growth and cut unemployment substantially, to
Finland and Cyprus which were negatively hit in terms of both metrics. The country
that experienced the largest GDP growth was Luxembourg with a commanding
5.6%. Cyprus saw its economy shrink by a 2.3%, which was actually a better result
than had been anticipated, bearing in mind the inevitable fallout from the dramatic
introduction of capital controls in 2013. Looking at chart 3 we nevertheless observe
that most countries, 20 out of 29 (EU Member States plus Iceland) fall in the top left
quadrant of the chart, combining positive growth and a reduction in unemployment.
Moreover, of the large EU economies, only Italy, albeit clearly catching up, is not yet
within the aforementioned 20. The overall effect on the EU was a growth rate of
1.3% and a reduction in unemployment of -0.7 percentage points.
Looking more closely at the change in unemployment, the ranking was topped
decisively by Hungary, which achieved a reduction of -2.5% in one year, largely
as a result of a vast public-works programme 1 . Italy and Finland fared less well,
gaining half-a-point and 0.6% respectively. France remained at 2013 levels in
both unemployment and GDP.
Inflation remained very low in 2014. The Harmonised Index of Consumer Prices
(HICP) in the euro area came down from 1.3% in 2013 to 0.4%, in a worryingly
deflationary path. Also inflation expectations, Chart 4, a key policy gauge for the
European Central Bank (ECB) deteriorated sharply in 2014. On this topic Mario
Draghi, President of the ECB, commented with these words: “We will do what
we must to raise inflation and inflation expectations as fast as possible, as our
price stability mandate requires of us. If on its current trajectory our policy is not
effective enough to achieve this, or further risks to the inflation outlook materialise,
we would step up the pressure and broaden even more the channels through
which we intervene, by altering accordingly the size, pace and composition of
our purchases” 2 . This line of thinking eventually led to the dramatic stepping
up of the bond buying operations in Q1 2015. The effects of this new policy can
already be seen in Chart 4. In fact, inflation expectation finally picked up after a
couple of years of trending downward.
CHART 3 Unemployment change and GDP growth in 2014 (%)
ie
6,0
5,0
4.0
lu
GDP Growth
HU
PL lt
mt
3.0
UK
sk
ro se
bG
ee lv
si
ic 2.0
cz
eu dk
de
nl
es
1.0
PO
be
EL
ea fr at
0.0
-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 Hr 0.5 1.0
fi it
-1.0
-2.0
Unemployment Change
-3.0
cy
CHART 4
Inflation expectations one and five years ahead in the euro area, as measured by the ECB
3.0
2.5
2.0
1.5
1.0
0.5
0.0
One year ahead
Five years ahead
1999 Q1
1999 Q4
2000 Q3
2001 Q2
2002 Q1
2002 Q4
2003 Q3
2004 Q2
2005 Q1
2005 Q4
2006 Q3
2007 Q2
2008 Q1
2008 Q4
2009 Q3
2010 Q2
2011 Q1
2011 Q4
2012 Q3
2013 Q2
2014 Q1
2014 Q4
Source: European Central Bank
1
European Commission: Macroeconomic imbalances Country Report – Hungary 2015,
http://ec.europa.eu/economy_finance/publications/occasional_paper/2015/pdf/ocp220_en.pdf
2
Opening keynote speech by Mario Draghi, President of the ECB at the Frankfurt European
Banking Congress
Frankfurt am Main, 21 November 2014, https://www.ecb.europa.eu/press/key/date/2014/html/
sp141121.en.html
2015 EMF HYPOSTAT | 9