Output Loss Severity across EU Countries. Evidence for the 2008 Financial Crisis

Financial crises are complex phenomena, in terms of the triggering factors, duration and severity, impact on both financial system and macroeconomic fundamentals and the full range of costs arising from its occurrence. The paper aims at providing an updated picture on the magnitude the 2008 financial crisis had, in terms of economic costs incurred by EU member states. It has been briefly reviewed crises’ main monetary and economic effects and costs. Then it has been employed International Monetary Fund’s approach for measuring crisis severity, expressed as an output loss indicator. To check the stability of the results, the basic methodology relying on a 3-year GDP trend has been complemented with a 7-year GDP trend. The output losses recorded by each EU country, under both trend assumptions, showed that Baltic states and Greece had been the most affected as they cumulated the highest losses. The lowest output losses have been registered in Western Europe countries (Austria, Belgium, France, Germany and Poland). Most EU economies’ growth still hasn’t entered on a robust ascending path, as they haven’t reached the level of GDP trend computed for the period preceding the onset of the financial crisis.