RegStream

ECB-CONFIDENTIAL

Escaping stagnation

Isabel Schnabel Member of the Executive Board of the ECB

Nuremberg Talks Institute for employment research, 11 February 2025

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Euro area has fallen behind as it failed to reap the benefits of the digital revolution Rubric

180

160

140

120

100

80

1995

Sources: ECB and Haver Analytics.

Latest observation: Q3 2024.

Productivity per hour worked

(index: Q1 1995 = 100)

EA

DE

US

2000

2005

2010

2015

2020

2024

2

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Rising gap in IT-related capital stock, with few firms benefiting from digitalisation

Rubric

Real IT-related net capital stock

(index: 1995 = 100)

EA Big-4

DE

US

1000

800

600

400

200

0 1995

1999

2003

2007

2011

2015

2019

2021

Source: EUKLEMS.

Note: IT-related net capital stock is the sum of computing equipment and computer software & databases for all NACE industries at 2020 prices. “EA Big-4” includes Germany, France, Italy and Spain. See Schivardi, F. and Schmitz, T. (2020), “The IT Revolution and Southern Europe’s Two Lost Decades”, Journal of the European Economic Association, Vol. 18(5), pp. 2441–2486.

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Impact of digitalisation on TFP growth

of firms with different initial levels

(digital investment intensity)

0. 10

0. 08

0. 06

0. 04

0. 02

0. 00

-0. 02

-0. 04

-0. 06

1

2

3

4

5

6

7

8

9

10

Source: Anderton, R. , Botelho, V. and Reimers, P. , gamechanger or sideshow?”, Working Paper Series, No 2794, ECB, March 2023.

Note: x-axis: proximity to frontier confidence intervals.

(deciles,

lowest-highest). Shaded area refers to

“Digitalisation and productivity:

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Recent weak euro area growth is driven by small set of countries including Germany Rubric

Real GDP in selected advanced economies

(index: Q4 2021 = 100)

Range

EA

US

DE

108

106

104

102

100

98 Q4 21

Q2 22

Q4 22

Q2 23

Q4 23

Q2 24

Q4 24

Sources: Eurostat, national sources (Haver Analytics) and ECB staff calculations.

Note: The grey area marks the range between the minimum and maximum values of real GDP for each quarter among US, UK, JP, CA, SE, EA and DE.

Latest observation: Q3 2024 for UK, JP, CA; Q4 2024 otherwise.

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Energy prices and China moving up the value chain weigh on euro area’s competitiveness

Rubric

Energy prices

relative to United States

(ratio, index: Jan 2018 = 1) Germany

Euro area

2

1. 8

1. 6

1. 4

1. 2

1

Global export market shares of non-energy goods volumes

(index: 2010 = 100) United States

Germany

China

Euro area

140

130

120

110

100

90

80

0. 8

2018

2020

2022

2024

Sources: Haver analytics and Eurostat.

Notes: Energy prices are producer prices indices (PPI) for energy.

Latest observation: December 2024.

70

2010

2012

2014

2016

2018

2020

2022

Sources: CPB, TDM and ECB staff calculations.

Notes: Long-run trends in export market shares in volume terms should be interpreted with caution. Euro area export volumes and world import volumes are not fully consistent, as each statistical office employs specific methodologies for deflating and outlier cleaning. These methodologies may differ in terms of outlier detection and replacement and quality adjustment. Based on this, the volumes (excluding energy) series used to compute the export market shares shown in the chart are calculated by taking CPB volumes (in 2005 chain linked billion euros) and subtracting the share of energy exports. This share of energy exports is based on TDM values and includes HS2 sectors 25, 26, 27, 97, 98, 99.

Latest observation: 2023.

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Export-led growth model is facing structural headwinds amplified by looming trade war

Rubric

Trade policy uncertainty

(lhs: percent of 2018 peak; rhs: index points)

Goldman Sachs

Baker et al.

Current account balance

(percentage of GDP)

Germany

United States

Euro area

10

5

0

-5

-10

2000

2005

2010

2015

2020

Sources: Haver Analytics and Eurostat.

Latest observation: 2024 Q3.

200 180 160 140 120 100 80 60 40 20 0 Dec-15

US election

(rhs)

10 9 8 7 6 5 4 3 2 1 0 Dec-24

Dec-18

Dec-21

Sources: Baker et al. (2016) via Bloomberg, Goldman Sachs research.

Notes: The trade policy uncertainty (TPU) index by Goldman Sachs (left-hand side axis) counts the number of articles that contain key TPU words scaled by the total number of articles. The world trade uncertainty (WUI) index is the equally weighted average from Baker, Bloom & Davis (right-hand side axis).

Latest observation: January for TPU, February for WUI.

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6

Green innovation and technological leadership can be an engine of growth Rubric

Patents by technology domain

(number of patents issued in 2020)

EU

US

China

Euro area export of cars

(12-month moving average; index: 2018 = 100)

Values

Volumes

130

120

110

100

90

80

70

Green

Biotech

Digital

60

2018

2020

2022

2024

25,000

20,000

15,000

10,000

5,000

0

Sources: EU Industrial R&D; Investment Scoreboard and Patstat.

Sources: Trade Data Monitor and ECB staff calculations.

Latest observation: November 2024.

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Opportunities from more cross-border trade in services and financial market integration

Rubric

Intra-EU trade in goods and services

(annual, in percentage of GDP)

Price- and quantity-based indicators of financial integration in the euro area

Price-based Indicator Quantity-based indicator Priced based indicator long term average Quantity-based indicator long term average

Euro introduction

Subprime crisis

Sovereign crisis

COVID-19 pandemic

Goods

Services

60

50

40

30

20

10

0. 9

0. 8

0. 7

0. 6

0. 5

0. 4

0. 3

0. 2

0. 1

0 2002

2005

2008

2011

2014

2017

2020

2023

0. 0

1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

0

0

0

0

0

0

0

0

0

0

-1

Sources: Eurostat and ECB staff calculations.

Notes: Intra-EU trade is obtained by summing intra-exports and imports as a ratio of GDP, measured in euros.

Latest observation: 2023.

Source: ECB staff calculations.

Latest observation: November 2024.

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Need to address labour scarcity from demographic and preference changes Rubric

Working-age population projections

(as % of total population)

EA

Germany

United States

Average hours worked per person employed

(index: 1995=100)

Germany

United States

Euro area

105

100

95

90

66

65

64

63

62

61

60

59

58

57

56

2022

2026

2030

2034

2038

2042

2046

2050

85

1995

2000

2005

2010

2015

2020

Sources: European Commission Europop 2023 and US Census Bureau.

Notes: Baseline scenario. Projections start in 2022.

Latest observation: 2050.

Source: European Commission (AMECO).

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Public investment can boost productivity growth, while keeping public debt sustainable Rubric

Public investment

(share of GDP)

EA

US

DE

Government debt

in the euro area and the US

EA

(percent of GDP) IT

DE

FR

ES

US

4. 5

4. 0

3. 5

3. 0

2. 5

250

200

150

100

50

2. 0

2005

2010

2015

2020

2024

Sources: European Commission (AMECO) and ECB staff calculations.

Latest observations: 2024.

0 2000 2003 2006 2009 2012 2015 2018 2021 2024

Source: European Commission.

Notes: The range shows the minimum and maximum of all euro area countries. Figures for 2024, 2025 and 2026 refer to the European Commission 2024 Autumn forecast.

Government debt is defined as in ESA 2010. The borrowing on the markets to finance the RRF grants and loans is considered as debt of the EU. The RRF loans to Member States are recorded as Member States’ debt towards the EU.

Latest observation: 2026 (projection).

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Thank you very much for your attention!

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