The composite output Purchasing Managers’ Index – which has a high correlation with growth in the euro area – remains above its long-term average and is close to six-year highs. Overall, survey data continue to point to growth in the quarters ahead. Moreover, Eurostat’s Economic Sentiment Indicator is near a ten-year high. The ongoing recovery has led to solid employment gains. The number of people employed in the euro area has increased by almost 7 million since hitting a trough in mid-2013. This means that all of the employment losses recorded during the crisis have been offset. Additionally, the unemployment rate is now at its lowest level in eight years and continues to decline, notwithstanding an increase in labour force participation. Employment growth, together with the gradual increase in employee compensation, supports households’ disposable income and is underpinning solid consumption dynamics. Robust consumer spending is driven by buoyant sentiment, favourable bank lending conditions and the notable progress achieved with respect to deleveraging. The investment outlook is also positive, supported not only by a need to modernise the capital stock after years of subdued investment and an improving outlook for profitability, but also by easy financing conditions as our policy measures have passed through financial markets to affect the borrowing conditions of businesses and their customers. Since the announcement of our policy measures in June 2014, bank lending rates for euro area non-financial corporations have fallen by around 120 basis points and those for households by around 100 basis points.
This is equivalent to 16% of the GDP of these economies, or nearly $ per citizen.2 But, this is only a lower bound of the cost of the crisis. If we also include the impact on GDP and the loss of production relative to its pre-crisis trend, the costs rise. This has been showed by several studies, including the one just mentioned by IMF economists, which estimates that banking crises that occurred between 1970 and 2000 are resulting in output losses of more than 20% on average if we look at all countries, and more than 30% of GDP in advanced economies.3 These results are in line with the BIS finding that the median discounted cumulative loss of output over the course of a crisis in the same period was about 19% of pre-crisis GDP.4 Now, the question of exactly how much regulation leads to the optimal outcome in terms of long-term growth is, of course, debatable. But let me underline that ambitious attempts have been made by the BIS, but also the OECD and others, to assess the net effect of recent regulatory reform measures, and the results generally point in one direction: that the net effect of reforms is positive. In addition, let me also underline that the Basel Committee has not been blind and deaf to the worries expressed by the industry about excessive regulation. Many adjustments have been made, not least when it comes to the new liquidity regulation.