Progress Towards External Adjustment In The Euro Area Periphery And The Baltics

Author: Joong Shik Kang
Publisher: International Monetary Fund
ISBN: 1498339026
Size: 21.71 MB
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Progress Towards External Adjustment In The Euro Area Periphery And The Baltics from the Author: Joong Shik Kang. The euro area periphery countries and the Baltic countries, which had large current account deficits in the run-up to the crisis, needed adjustment of relative prices to achieve both internal and external balances. Thus far, tangible progress has been made through lower wages and/or higher productivity relative to trading partners (“internal devaluation”), which contributed to narrowing current account deficits and shifting output towards the tradables sector. While some early adjusters cut wages more rapidly followed by productivity improvement, others have only slowly improved productivity largely through labor shedding. This adjustment for most countries has come along with a substantial recession as the unit labor cost improvement has largely come from falling employment and much of the current account improvement from import compression. Going forward, these countries still need to generate growing tradables sector employment and to continue adjustment to prevent imbalances from returning as output gaps close.

Adjustment In Euro Area Deficit Countries Progress Challenges And Policies

Author: Mr. Thierry Tressel
Publisher: International Monetary Fund
ISBN: 1498362907
Size: 71.86 MB
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Adjustment In Euro Area Deficit Countries Progress Challenges And Policies from the Author: Mr. Thierry Tressel. Imbalances within the euro area have been a defining feature of the crisis. This paper provides a critical analysis of the ongoing rebalancing of euro area “deficit economies” (Greece, Ireland, Portugal, and Spain) that accumulated large current account deficits and external liability positions in the run-up to the crisis. It shows that relative price adjustments have been proceeding gradually. Real effective exchange rates have depreciated by 10-25 percent, driven largely by reductions in unit labor costs due to labor shedding. While exports have typically rebounded, subdued demand accounts for much of the reduction in current account deficits. Hence, the current account balance of the euro area as a whole has shifted into surplus. Internal rebalancing has come with subdued activity—notably very high unemployment in the deficit economies—and made continued adjustment more difficult. To advance rebalancing further, the paper emphasizes the need for: (1) macroeconomic policies that support demand and bring inflation in line with the ECB’s medium-term price stability objective; (2) continued EMU reforms (banking union) to ensure proper financial intermediation; and (3) structural reforms in product and labor markets to improve productivity and support the reallocation of resources to tradable sectors.

Ireland Ex Post Evaluation Of Exceptional Access Under The 2010 Extended Arrangement

Author: International Monetary Fund. Finance Dept.
Publisher: International Monetary Fund
ISBN: 149830401X
Size: 58.87 MB
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Ireland Ex Post Evaluation Of Exceptional Access Under The 2010 Extended Arrangement from the Author: International Monetary Fund. Finance Dept.. This paper presents an Ex Post Evaluation of the 2010 Extended Fund Facility (EFF) arrangement with Ireland. The Fund approved in December 2010 an exceptional access EFF arrangement for SDR 19.466 billion (2,321.8 percent of quota) in support of Ireland’s home-grown program and as part of a broader financing package of Ireland and its European partners. The program focused on addressing the Irish banking crisis to break the adverse feedback loop between banks, the sovereign, and the real sector. It aimed to restore the banking system to health, including by establishing a smaller banking sector with high capital buffers and more stable funding sources; and to secure fiscal sustainability while limiting the near-term demand drag from fiscal consolidation. Large external financing was a key element of the crisis response. Program implementation was very strong. The program succeeded in stabilizing the banking sector and reducing its size, and fiscal developments were also broadly as anticipated. Domestic demand was, however, weaker than programmed and unemployment remained high, amid a very challenging external environment. Program success, including regaining market access at low interest rates, benefitted also from actions at the wider euro area level. The Ex Post Evaluation draws several lessons from Ireland’s experience under the EFF: ? The main lessons emerge from what worked well: Strong country ownership, setting (and meeting) realistic and tailored targets were key for success, combined with effective communication and pro-active engagement. Addressing a banking crisis requires strong and credible actions upfront. ? Some areas offer lessons for future program design: While the main pillars of the financial sector program were sound, more proactive and stronger supervisory interventions and other supportive steps could have strengthened banks’ balance sheets and bank profitability and helped resolve problem loans; bank recapitalization should be limited to those with viable medium-term business strategies; unsecured and non-guaranteed creditors of failed banks should be bailed in, provided a strategy to ring fence potential systemic risks can be put in place; macro-financial linkages require careful attention and timely steps to limit sovereignbanking sector feedback loops; fiscal policy has to be mindful of debt sustainability but also of domestic demand conditions, and it needs a clear anchor. ? There are also lessons related to Fund policies: Ireland’s EFF underscores the importance of addressing shortcomings of the systemic exemption clause in Criterion 2 of the exceptional access criteria; and it suggests the need to explore ways to secure stronger upfront commitments from monetary union authorities, when those are critical for program success.

In Search Of A New Equilibrium

Author: Paolo Canofari
Publisher: Edizioni Nuova Cultura
ISBN: 8868124556
Size: 80.10 MB
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In Search Of A New Equilibrium from the Author: Paolo Canofari. The book shows that the overcoming of the negative imbalances in the current accounts of the large majority of peripheral Member States in the euro area is mainly due to a recession-driven decrease in import, a monetary wage compression, and below average rates of inflation. This re-equilibrating process thus leads to short-term adjustments, in the sense that it is unable to structurally fill the competitive gaps accumulated inside the euro area during the first decade of its life (1999-2007), owing to the inefficient allocation of the financial flows coming from the European central countries and invested in the European peripheral countries. Contrary to the predictions of the standard macroeconomic models based on the “catching up” mechanism, these financial flows did not adequately foster the productivity of lagged Member States in the euro area. Our proposal is to replace the “invisible hand” of the market with the “visible hand” of a European policy project. We argue that an effective policy initiative would have to combine a programme of European public and private investments with “contractual arrangements” aimed at implementing crucial national reforms. This strategy might provide a short term positive demand shock as well as the long term strengthening of the structural competitiveness of the peripheral Member States without involving direct financial transfers but allowing an intergovernmental co-operation and a trust-building process under the control of the European institutions. Marcello Messori is Professor of Economics at the Department of Political Science, LUISS Guido Carli (Rome) and Director of the LUISS School of European Political Economy (SEP).

How To Fix The Euro

Author: Stephen Pickford
Publisher: Chatham House
ISBN: 9781784130138
Size: 31.73 MB
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How To Fix The Euro from the Author: Stephen Pickford. The global economic and financial crisis that started in 2007 exposed serious flaws in the euro's original design. This report examines why Europe's economic and monetary union was so badly affected by the crisis, and assesses whether further changes need to be made to the structure of economic governance that underpins it. A Chatham House, Elcano and AREL Report

Capitalist Diversity On Europe S Periphery

Author: Dorothee Bohle
Publisher: Cornell University Press
ISBN: 0801465222
Size: 40.58 MB
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Capitalist Diversity On Europe S Periphery from the Author: Dorothee Bohle. With the collapse of the Council for Mutual Economic Assistance in 1991, the Eastern European nations of the former socialist bloc had to figure out their newly capitalist future. Capitalism, they found, was not a single set of political-economic relations. Rather, they each had to decide what sort of capitalist nation to become. In Capitalist Diversity on Europe's Periphery, Dorothee Bohle and BĂ©la Geskovits trace the form that capitalism took in each country, the assets and liabilities left behind by socialism, the transformational strategies embraced by political and technocratic elites, and the influence of transnational actors and institutions. They also evaluate the impact of three regional shocks: the recession of the early 1990s, the rolling global financial crisis that started in July 1997, and the political shocks that attended EU enlargement in 2004. Bohle and Greskovits show that the postsocialist states have established three basic variants of capitalist political economy: neoliberal, embedded neoliberal, and neocorporatist. The Baltic states followed a neoliberal prescription: low controls on capital, open markets, reduced provisions for social welfare. The larger states of central and eastern Europe (Poland, Hungary, and the Czech and Slovak republics) have used foreign investment to stimulate export industries but retained social welfare regimes and substantial government power to enforce industrial policy. Slovenia has proved to be an outlier, successfully mixing competitive industries and neocorporatist social inclusion. Bohle and Greskovits also describe the political contention over such arrangements in Romania, Bulgaria, and Croatia. A highly original and theoretically sophisticated typology of capitalism in postsocialist Europe, this book is unique in the breadth and depth of its conceptually coherent and empirically rich comparative analysis.

Changing Welfare States

Author: Anton Hemerijck
Publisher: Oxford University Press
ISBN: 0199607605
Size: 34.62 MB
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Changing Welfare States from the Author: Anton Hemerijck. Changing Welfare States is is a major new examination of the wave of social reform that has swept across Europe over the past two decades. In a comparative fashion, it analyses reform trajectories and political destinations in an era of rapid socioeconomic restructuring, including the critical impact of the global financial crisis on welfare state futures. The book argues that the overall scope of social reform across the member states of the European Union varies widely. In some cases welfare state change has been accompanied by deep social conflicts, while in other instances unpopular social reforms received broad consent from opposition parties, trade unions and employer organizations. The analysis reveals trajectories of welfare reform in many countries that are more proactive and reconstructive than is often argued in academic research and the media. Alongside retrenchments, there have been deliberate attempts - often given impetus by intensified European (economic) integration - to rebuild social programs and institutions and thereby accommodate welfare policy repertoires to the new economic and social realities of the 21st century. Welfare state change is work in progress, leading to patchwork mixes of old and new policies and institutions, on the lookout, perhaps, for greater coherence. Unsurprisingly, that search process remains incomplete, resulting from the institutionally bounded and contingent adaptation to the challenges of economic globalization, fiscal austerity, family and gender change, adverse demography, and changing political cleavages.

A Triumph Of Failed Ideas European Models Of Capitalism In The Crisis

Author: Steffen Lehndorff
Publisher: ETUI
ISBN: 2874522465
Size: 50.42 MB
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A Triumph Of Failed Ideas European Models Of Capitalism In The Crisis from the Author: Steffen Lehndorff. The current crisis in Europe is being labelled, in mainstream media and politics, as a ‘public debt crisis’. The present book draws a markedly different picture. What is happening now is rooted, in a variety of different ways, in the destabilisation of national models of capitalism due to the predominance of neoliberalism since the demise of the post-war ‘golden age’. Ten country analyses provide insights into national ways of coping – or failing to cope – with the ongoing crisis. They reveal the extent to which the respective socio-economic development models are unsustainable, either for the country in question, or for other countries. The bottom-line of the book is twofold. First, there will be no European reform agenda at all unless each country does its own homework. Second, and equally urgent, is a new European reform agenda without which alternative approaches in individual countries will inevitably be suffocated. This message, delivered by the country chapters, is underscored by more general chapters on the prospects of trade union policy in Europe and on current austerity policies and how they interact with the new approaches to economic governance at the EU level. These insights are aimed at providing a better understanding across borders at a time when European rhetoric is being used as a smokescreen for national egoism.

Economics Of Monetary Union

Author: Paul De Grauwe
Publisher: Oxford University Press
ISBN: 0198739877
Size: 41.97 MB
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Economics Of Monetary Union from the Author: Paul De Grauwe. The eleventh edition of Economics of Monetary Union provides a concise analysis of the theories and policies relating to monetary union. The author addresses current issues surrounding the Eurozone, including; a critical discussion of the costs and benefits of possible exits by its member countries, an analysis of the role of the ECB as new single supervisor and detail on the sovereign debt crisis. In Part One the author examines the implications of adopting a common currency, assessing the benefit to each country from being a member of the Eurozone, whilst also questioning whether other parts of the world would gain from monetary unification. Part Two of the book looks at the problems of running a monetary union by analysing Europe's experience and the issues faced by the European Central Bank. Contents List Part One: Costs and Benefits of Monetary Union Chapter 1 The Costs of Common Currency Chapter 2 The Theory of Optimum Currency Areas: A Critique Chapter 3 The Benefits of a Common Currency Chapter 4 Costs and Benefits Compared Part Two: Monetary Union Chapter 5 The Fragility of Incomplete Monetary Union Chapter 6 How to Complete a Monetary Union? Chapter 7 The Transition to a Monetary Union Chapter 8 The European Central Bank Chapter 9 Monetary Policy in the Eurozone Chapter 10 Fiscal Policies in Monetary Unions Chapter 11 The Euro and Financial Markets Online Resource Centre The Online Resource Centre features: For Students: Links to data sources Essay questions Paul de Grauwe on Twitter Links to articles and papers For Lecturers: Instructor manual PowerPoint slides