WRITTEN QUESTION E-2716/00

by Christopher Huhne (ELDR) to the Commission

(1 September 2000)

Subject: Capital flows in the euro zone

Will the Commission please examine the scale of capital flows within the euro zone countries since the launch of the euro compared with the periods before and state whether there has been an increase in the scale of such flows and, if so, by how much?

Answer given by Mr Solbes Mira on behalf of the Commission

(17 October 2000)

The analysis of capital flows within Member States would be an interesting topic, because results should give hints on structural changes and the success of regional policies (e.g. Community projects). However, it appears difficult, if not impossible, to measure capital flows within Member States as there is no database available which would allow to go beyond theoretical analysis.

Data on capital flows among eurozone countries is not made available to an extent sufficient for reliable conclusions. Again there is no central database known that provides timely information for all zone countries. For that reason preliminary observations can only be taken from annual foreign direct investment (FDI) data and capital accounts provided by national central banks.

First estimates of FDI flows in 1999 published by Eurostat (see tables 1.a and 1.b sent direct to the Honourable Member and to Parliament's Secretariat) together with revised 1998 data indicate that outflows from eurozone countries reached a record high of about 300 000 million as compared to about 240 000 million in 1998. An increase was also reported for inward flows to the zone which surged from 150 000 million to 170 000 million in 1999. At the Member States level no breakdown by destination was made available for France. Among the other Member States, Belgium, Germany and the Netherlands reported both the largest inward and the largest outward flows. Substantial changes in these flows, as for instance the tripling of French outward flows in 1999 or the drop in Finnish outward flows down to one sixth of the 1998 figure, have to be related to single mergers and acquisitions. In that regard any comparison between pre-European Monetary Union (EMU) and EMU years can only provide a limited amount of information.

In August 2000 the Bundesbank reported capital flows between Germany and other parts of the zone in its statistical supplements (see table 2 sent direct to the Honourable Member and to Parliament's Secretariat). Capital exports to the rest of the zone had increased by about one quarter in 1999 compared to 1998 while capital imports in 1999 fell to one third of the level reported for 1998. In the first half of 2000 the increases in net German investment abroad were at the same level as in 1999 while net foreign investment from eurozone countries in Germany dropped as capital imports from this area turned into capital exports. Key determinants were portfolio investment outflows and direct investment outflows. Again however, these statistics display large and abrupt changes, possibly reflecting single transactions. In that regard differences identified in comparisons of data for 1998 and 1999 could only be related to the start of EMU and have to be interpreted with great caution.