Euro area international investment position and its geographical breakdown (as at end-2005)

The international investment position of the euro area vis-à-vis the rest of the world recorded net liabilities of EUR 811 billion (representing 10% of euro area GDP) at the end of 2005. Compared with the end of 2004, the net liability position declined by EUR 14 billion. This lower net liability position was mainly the result of revaluation effects due to movements in exchange rates, which outweighed the net effect of the transactions during the same period. Concerning the stock of euro area direct investment abroad at the end of 2005, 24% was invested in the United Kingdom and 21% in the United States. Almost two-thirds of the stock of foreign direct investment in the euro area originated from these two countries. For the stock of euro area portfolio investment abroad, the shares accounted for by the United Kingdom and the United States were 22% and 34%, respectively.

At the end of 2005, the international investment position (i.i.p.) of the euro area vis-à-vis the rest of the world recorded net liabilities of EUR 811 billion (representing 10% of euro area GDP). This reflects a decrease of EUR 14 billion in net liabilities as compared with the revised end-2004 position, which represented 11% of euro area GDP (see Chart 1).

The decrease in the net liability position between end-2004 and end-2005 was mainly due to revaluation effects resulting from movements in exchange rates, which outweighed the increase in net liabilities of EUR 37 billion due to transactions. The transactions were driven by increases in net liabilities in both portfolio and other investment that surpassed increases in net assets in both direct investment and financial derivatives.

At the end of 2005, the stock of euro area foreign direct investment abroad amounted to EUR 2.7 trillion, 75% of which was invested in the United Kingdom (EUR 652 billion), the United States (EUR 558 billion), the group of “other countries” (EUR 510 billion), i.e. all countries except Switzerland that neither belong to the European Union nor the G7, and offshore financial centres (EUR 316 billion). The stock of foreign direct investment in the euro area came to EUR 2.4 trillion, 80% of which originated from the same four areas. As regards net direct investment positions, the United Kingdom was an important net investor in the euro area.

With regard to portfolio investment, euro area holdings of foreign securities amounted to EUR 3.9 trillion at the end of 2005, largely reflecting holdings of securities issued in the United States (EUR 1.3 trillion), the United Kingdom (EUR 861 billion), the group of “other countries” (EUR 451 billion) and offshore financial centres (EUR 411 billion). Foreign holdings of euro area securities amounted to EUR 5.0 trillion at the end of 2005.

Turning to other investment (e.g. trade credits and bank loans), the outstanding amount of euro area holdings abroad was EUR 3.7 trillion at the end of 2005, 44% of which was invested in the United Kingdom, 16% in the group of “other countries” and 14% in the United States. The other investment in the euro area amounted to EUR 4.0 trillion at the end of 2005. The United Kingdom and offshore financial centres accounted for 40% and 14% of these liabilities respectively and the United States and the group of “other countries” together for another 26%.

This press release incorporates a revised set of balance of payments (b.o.p.) and i.i.p. statistics since 1999, in addition to the end-2005 i.i.p. data.

Some methodological changes in the recording of trade in services led to a slight increase in both the euro area current account and financial account balance from 1999 to 2002. The revision of the 2004 b.o.p. mainly concerned the income credits data and increased the current account surplus in comparison to previously published statistics by EUR 5.7 billion, to EUR 55.6 billion. The revisions to the 2005 current account data mainly concerned income from direct investment and resulted in a reduction of the current account deficit by EUR 14.9 billion to EUR 8.2 billion. Finally, in the financial account, data revisions primarily affected direct investment in 2004 and 2005. The main change in 2005 concerned a higher estimate of direct investment abroad (an upward revision of outflows by EUR 61.3 billion compared with previously published statistics), in particular in equity capital.

Revisions of the i.i.p. resulted in a lower euro area net debtor position in 2004 (by EUR 121 billion), mainly due to a lower estimate of foreign direct investment holdings of euro area equity capital. Finally, compared with the results previously published for the fourth quarter of 2005 the net euro area debtor position at end-2005 was EUR 250 billion lower. This mainly reflects a higher estimate of euro area portfolio holdings of equity securities issued by non-euro area residents.

Geographical details for the annual i.i.p. of the euro area are not available in this press release for the items portfolio investment liabilities, financial derivatives and reserve assets

A complete set of updated euro area b.o.p. and i.i.p. statistics is available on the ECB’s website in the “Statistics” section under the heading “Data services”/“Latest monetary, financial markets and balance of payments statistics”. These data can also be downloaded from the ECB Statistical Data Warehouse (SDW). The results will be published in the December 2006 issue of the ECB’s Monthly Bulletin. A detailed methodological note [pdf] is available on the ECB’s website. The next press release on the euro area balance of payments including geographical details and the quarterly international investment position will be published on 18 January 2007.

Table 1 – Annual balance of payments and international investment position of the euro area

Table 2a – Annual international investment position of the euro area with a geographical breakdown (end-2005)

Table 2b – Annual international investment position of the euro area with a geographical breakdown (end-2004)

Table 3 – Revisions to balance of payments and international investment position of the euro area