Extracts from the press conference by Olli Rehn on the Fiscal Sustainability Report 2012

Type: Summary of press conference   Reference: I-075709   Duration: 10:04:18  Lieu:
End production: 18/12/2012   First transmission: 18/12/2012
On 18 December 2012, Olli Rehn, Vice-President of the EC in charge of Economic and Monetary Affairs and the Euro, gave a press conference on the Fiscal Sustainability Report 2012, at the European Commission in Brussels. Macroeconomic imbalances in the euro area and in the EU expanded significantly in the run-up to the financial crisis. The imbalances manifested themselves in significant and persistent divergence in the current accounts of EU Member States. Although the current account of the euro area, as a whole, remained broadly balanced, current account deficits deteriorated significantly in some Member States, while surpluses increased substantially in others. From the macroeconomic viewpoint, the deficits in the euro area were thus financed by the surpluses in Germany, the Netherlands, Belgium, Finland, Austria and Luxembourg. Outside the monetary union, Denmark and Sweden also ran important surpluses. A similar accumulation of external imbalances was observed on a global scale. For example, the United States ran persistent current account deficits, while China and Japan registered persistent surpluses. Notwithstanding the intra-euro area rebalancing underway, the current account surpluses and deficits recorded by some EU countries are still high.

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10:00:00 Title 00:00:05
10:00:05 Arrival of Olli Rehn, Vice-President of the EC in charge of Economic and Monetary Affairs and the Euro, to the press conference on Current Account Surpluses in the EU and the 2012 Fiscal Sustainability Report, at the European Commission in Brussels 00:00:07
10:00:12 Soundbite by Olli Rehn (in ENGLISH): The main findings of three important reports; one on current accounts surpluses, second on fiscal sustainability and the third on the quality of public expenditure. 00:00:15
10:00:27 Cutaway of a photographer 00:00:02
10:00:30 Soundbite by Olli Rehn (in ENGLISH): Specifically the deficit countries usually reflect a misallocation of resources in the real economy. This can be seen in the excessive growth on some private sectors, such as construction and real state in some countries like Spain or Ireland and on public sectors in others like Greece. The misallocation of real assets over the current account has its origins and also its repercussions in the financial accounts of the financial assets in the current account. 00:00:39
10:01:09 Cutaway of journalists 00:00:04
10:01:14 Soundbite by Olli Rehn (in ENGLISH): Germany acquired foreign assets in return. Normally one would expect that the foreign net worth of Germany increase by the same amount, but here we can see that this was not the case, that is the black line, due the financial crisis, not least due to the variations losses related to the subprime crisis related in US through the banking system of Germany. The German savings invested in foreign assets experienced valuation losses in this context. 00:00:39
10:01:54 Cutaway of journalists 00:00:04
10:01:59 Soundbite by Olli Rehn (in ENGLISH): What is important to point out is that, at euro area level, several structural characteristics suggest that a moderate surplus is appropriate. These characteristics include the ageing of European population, the relative high levels of income per capita, the need for continued fiscal consolidation and the reduction in indebtedness in the private sector in many countries. 00:00:36
10:02:36 Cutaway of journalists 00:00:04
10:02:40 Soundbite by Olli Rehn (in ENGLISH): This suggests that the euro area rebalancing has not been detrimental to the competitiveness of the surplus eurozone countries vis-à-vis the rest of the world. 00:00:16
10:02:57 Cutaway of the audience 00:00:04
10:03:01 Soundbite by Olli Rehn (in ENGLISH): Increase in domestic demand in surplus countries helps with the rebalancing. Obviously it increases the imports of these countries and, in reverse, the exports of their partners; but its impact should not be overestimated, that is another finding of the report. It is no panacea, no silver bullet for the countries suffering from large and other persistent current account deficits. 00:00:36
10:03:37 Cutaway of a journalist 00:00:03
10:03:41 Soundbite by Olli Rehn (in ENGLISH): the analysis included in these reports, is consistent with the EU strategy of prudent fiscal consolidation, both structural reforms and boosting private and public investment. While we see that the fiscal deficits are coming down and that the rebalancing of the European economies is underway, consistent economic reforms are needed to restore confidence and generate sustainable growth and job creation in the European economy. 00:00:37
10:04:18 Olli Rehn leaving the room 00:00:08
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