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  1. the Global financial crisis: Impact on GDP and Government deficit in Germany OECD Working Party on National Accounts, Paris, November 04-06, 2009 - Draft -

  2. 1. INTRODUCTION • Ingredients of the global financial crisis: • - Subprime loans • - Securitisation and structured financial products • - Mismatch: short-term financing of long-term securities • - Decreasing house prices

  3. Change of financialassets Due to saving … Due to holding gains/losses

  4. 9 - 15

  5. Part 2 Impact on General Government Deficit

  6. Governments‘ support measures for banks: • Industrie- und Kreditbank, IKB • Sachsen LB • West LB • Commerzbank AG • Bayern LB • Aareal Bank • LB Baden-Württemberg • HSH-Nordbank • Hypo Real Estate (HRE)

  7. Special Fund on Stabilization of financial markets (SOFFIN)* Goal:Central government unit to stabile financial markets by overcoming liquidity shortages and strengthening the equity capital base of financial enterprises Instruments: • Garantees on liabilities of financial enterprises (against fee) • -> up to 400 mrd. Euro (provision for calls: 20 mrd Euro) • Capital injections (against interests ) • Purchase of impaired assets • -> b) + c) up to 80 mrd. Euro Conditions:The useof the instruments is usually subject toconditions imposed bycentral government, concerning for instance the business policy, the salaries of managers, dividend payments. *Founded by the Financial markets stabilization law of 17.10.2008 (BGBL. 2008, Teil I, p. 1982 ff.) and later amendments.

  8. Quelle: Der Spiegel 46/2008, S. 61 (10.11.2008

  9. Frequent measures of stabilization • Foundation of special economic entities • Special Fund on Stabilisation of Financial Markets • Special puposes entities (SPE) • Guarantees • Capital injections, recapitalisation • Purchase of impaired assets • Nationalisation

  10. Background: Budget surveillance in the EU • Eurozone • Excessive Deficit procedure (Maastricht Treaty 1993): • - max. 3% deficit ratio, • - max. 60% debt ratio. • Stability and Growth pact (1998) re-inforces deficit ratio. • Data transmission based on: • - European System of National Accounts (ESA) 1995, • - Uniform interpretation by Eurostat decisions.

  11. Sector allocation of economic units: • Institutional unit (ESVG para. 2.12) ? • Ownership of / exchange of goods and assets, • Take economic decisions / responsibility, • Incur liabilities and other obligations and commitments, as well as entering into contracts, • Keep accounting records • Controlled by general government ? • Market- or non-market producer (50% criteriuon)? Example : German SOFFIN

  12. Special case: SPEs like Bad banks • a) Government-owned SPEs, • If they conduct specific government policies without autonomy of decision , they are inside the General Government sector. • b) Privately owned SPEs, • if their sole purpose is to address the financial crisis, • + if they are created during the financial crisis with a finite life, • + if the expected losses are expected to be small for government, • = are outside the general government sector • (even in case of a GG guarantee)

  13. Garantees • General principles of ESA 1995: • In ESA 1995 a guarantee represents a contingent liability, which generally is not booked at the moment when agreed (ESA para. 5.05). • The call of a guarantee, on the other hand, is booked as capital transfer when the call occurs (ESA para. 5.16, 4.165f). Impact on net lending/borrowing of GG when called (and normally on gross debt of GG)

  14. Capital injection / Recapitalisation • Shares and other equity not listed • Transactions in shares and other equity of corporations and quasi-corporations, which are not listed on stock markets, are to be treated as financial transactions: • The investor receives assets of the same value. • The investor receives a market rate of return (EU state aid rules). Impact on net lending/borrowing of GG depends on circumstances (but normally impact on gross debt of GG)

  15. Shares and other equity listed • Compare Purchaser price = market value Depending on the test, there may be an impact on net lending/ borrowing (as well as on gross debt of GG).

  16. Purchase of impaired assets • Purchase of securities (other than equity) and derivatives • Purchaser price = Market value • Purchaser price > Market value No impact on net lending/borrowing of GG; but normally impact on its gross debt (the purchaser price). Impact on net lending/borrowing (difference between purchaser price and market value) of GG (and normally on gross debt of GG via purchaser price.)

  17. Nationalisation • Nationalisation = Aquisition of majority equity by General Government. • Cf. Capital injections and purchase of assets • N.B.: Seizure = Expropriation by general government • - with compensation • - uncompensated

  18. Impact of financial markets stabilization measures on net lending/borrowing of General Government in 2008

  19. Impact of financial markets stabilization measures on gross debt of general Government 2008

  20. Impact on GDP Part 3

  21. Real Gross Domestic Productunadjusted figures in %

  22. Real Gross Domestic Product + Employeesin % to previous year

  23. Real Gross Domestic Product + Hours workedin % to previours year

  24. Employees + Hours workedin % to previous year

  25. Real Gross Domestic Product08/09 and 1st estimatein % to previous year

  26. Many thanks for Your attention Albert Braakmann Federal Statistical Office, Wiesbaden, Germany