andreas dombret : the sovereign debt crisis in europe and its impact on the emerging market economies speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, to the german - brazilian chamber of industry and commerce, sao paulo, 6 december 2012. * 1. * * introduction mr porto consul general von kummer ladies and gentlemen i am delighted to be speaking here today to the german - brazilian chamber of industry and commerce and i wish to thank you all for your interest. sao paulo is the financial and economic centre of latin america and, for that reason, the bundesbank has been sending a representative to the german consulate general here since 2005. today, a new representative has taken up office. his tasks will include regular reports to the executive board of the bundesbank, keeping it informed of economic and financial developments in brazil and other countries in latin america. this is because brazil ’ s importance for the world economy is growing constantly. in 2011, brazil overtook the united kingdom as the sixth - largest economy in the world, and it is probably only a matter of time before it dislodges france from fifth place. and, after that, brazil will have germany in its sights. generally speaking, the past few years have seen the weights in the world economy shifting significantly in favour of the emerging economies. during the sharp economic slump in 2009, the rapidly growing emerging market economies also fulfilled an important stabilising function for the global economy. institutionally, the shift in weights was reflected not least by the g7 becoming less important and by the g20 rising to become the central forum for international fiscal and economic policy cooperation. the large emerging market economies are now closely involved in international cooperation. the emerging economies will have greater influence in the international monetary fund, too. people in brazil and other major emerging economies are concerned about the ongoing financial and sovereign debt crisis in the euro area. the crisis in the euro area is often regarded as one of the greatest risks to the world economy. in my short speech, i would like to provide a brief outline of the causes and effects of the crisis and investigate the extent to which the crisis is actually impairing growth in the emerging economies. 2. emergence of the crisis and measures to contain it the sovereign debt crisis has been going on for about three years now. it began with greece in may 2010, and greece remains the most difficult problem case in the euro area. but the crisis spread to other euro - area

euro area itself – something which is being felt, not least, by german exporters. for another, exports to the euro area are of relatively minor importance for most regions outside europe. last year, euro - area countries imported goods worth us $ 2, 340 from outside the euro area, which corresponds to just under one - fifth of the euro area ’ s gross domestic product ( gdp ). in the first half of 2012, imports from non - euro - area countries fell by 4 %. looking at the situation the other way round, exports to the euro area account for just 4 % of the rest of the world ’ s gdp. if the emerging and developing countries are combined into a single group, the figure is somewhat higher, at 5 %. over the past few years, exports of goods to the euro area have made a positive contribution to economic growth in the emerging and developing countries, but this stimulus is now absent. in nominal terms, the lack of this growth impulse explains only about a tenth of the current slowdown in growth in the emerging market economies and developing countries. for brazil, the euro area is of even less importance as a sales market. exports to the euro area account for no more than 2 % of gdp. with an export share of 10 % of gdp, brazil is, anyway, a rather closed economy. with regard to the currently quite marked slowdown in growth in brazil, other factors are therefore of greater relevance. this significant growth slowdown in the large emerging economies is due mainly to specific, home - grown factors. here in brazil, the deceleration was especially pronounced in industry. one major reason for the lull since 2010 is the loss of price competitiveness due to the appreciation of the brazilian real. another factor, admittedly, is that real earnings in the manufacturing sector have also gone up sharply over the past few years. you all know that brazil is not a low - wage country. as a result, domestic goods are increasingly being substituted by imports. the congested infrastructure ranks as a further structural obstacle to macroeconomic development. the fact that there are said to be roughly as many helicopter taxis in sao paulo as there are helicopters in all of germany is due, if nothing else, to your city having gained a reputation for being faced with frequent traffic jams. logistics experts say that deliveries of goods in brazil take twice as long over the same distance as in china. whether or not the announced government investment programme to modernise the road and rail networks