Transcript TIGHTENING LABOUR MARKETS

Wiener Institut für
Internationale
Wirtschaftsvergleiche
The Vienna Institute for
International Economic
Studies
www.wiiw.ac.at
Impacts of the global crisis and future growth challenges
Strategie Evropa 2020 jako reakce na krizi: cesty k posílení
ekonomického rustu a konkurenceschopnosti
Peter Havlik
The Vienna Institute for International Economic Studies
(wiiw)
September 2010
2
Growth model, global crisis and the Strategy Europe 2020
Key points:
 Growth model: liberalization and integration
 Global crisis: transmitted via the growth model
 Strategy Europe 2020: a revival of Lisbon ?
wiiw
3
Key features of the (old) growth model:
 significant internal and external liberalization (trade flows,
capital transactions, financial market integration)
 targeted at integration with the EU area
 benefits: capital inflows (FDI), trade integration, ‘technology’
transfer; institutional convergence
 the model worked - ‘convergence process’ – but structural (and
sometimes unsustainable) imbalances emerged
wiiw
4
Trade balance of goods and services, in % of GDP
6
0
-6
-12
-18
-24
6
0
-6
-12
-18
-24
6
0
-6
-12
-18
-24
NMS-5 (CZ)
Baltics
SEE
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
NMS-5: CZ, HU, PL, SK, SI. Baltics: EE, LV, LT. SEE: BG, RO, HR, MK, BA (from 1998), RS (from 1999), ME (from 2001).
Source: wiiw Annual Database incorporating national statistics, Eurostat.
wiiw

6
Income catching-up: per capita GDP at PPP
Projection assuming a 50% growth differential with respect to EU-27 after 2013 (compared to
the average growth differential in the period 2000-2008)
EU-27 average = 100
BG
CZ
HU
PL
RO
SK
100
90
80
70
60
50
40
30
20
10
0
1995
2000
2005
2008
2009
2010
2015
2020
wiiw
7
Three transmission channels of the crisis:
 I. Collapse of demand for imports from the region
- => collapse of exports
- => collapse of industrial production
- => collapse of oil and metals prices (RU, UA, KZ)
 II. More difficult credit financing for households, companies and
government after September 2008 (Lehman Brothers exit)
 III. Hardly any counter-cyclical economic policy measures of the
state (except Russia, Kazakhstan and Poland)
wiiw
8
Collapse of exports after Sept. 2008
in EUR, January 2007 = 100
Quelle: wiiw-Monatsdatenbank.
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
Sep-07
SK
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
HU
May-05
Jan-05
Sep-04
May-04
170
160
150
140
130
120
110
100
90
80
70
60
50
Jan-04
CZ
wiiw
11
Budget deficit and public debt, 2008
in % of GDP (Maastricht criteria)
NMS
OMS
EU-27
High public debt
Unsustainable
Public debt (< 60%)
140
-15
120
100
IT
GR
80
UK
-12
-9
IE
HU
PT
60
FR
-6
ES
LV
RO
40
20
DE
AT
EU-27
-3
NL
0
SE
SK
3
6
DK
CZ
SI
BG
EE
0
High fiscal deficit
Source: wiiw Database based on Eurostat.
Fiscal deficit (< 3%)
Maastricht compliant
wiiw
9
12
Budget deficit and public debt, 2010
in % of GDP (Maastricht criteria)
NMS OMS EU-27
High public debt
Unsustainable
140
Public debt (< 60%)
GR
-15
120
IT
IE
PT
UK
FR
-12
80
HU
EU-27
AT
ES
100
DE
NL
-9
LV
-6
PL
SK SI
CZ
LT
DK
RO
60
-3
0
3
6
SE
40
20
BG
EE
0
High fiscal deficit
Source: European Commission forecast.
Fiscal deficit (< 3%)
Maastricht compliant
wiiw
9
14
Strategy Europe 2020
 Raising the employment rate of the population aged 20-64 from
the current 69% to 75%
 Raising the investment in R&D to 3% of the EU's GDP
 Meeting the EU's '20/20/20' objectives on greenhouse gas
emission reduction and renewable energies
 Reducing the share of early school leavers from the current 15%
to under 10% and making sure that at least 40% of youngsters
have a degree or diploma
 Reducing the number of Europeans living below the poverty line
by 25%, lifting 20 million out of poverty from the current 80
million.
wiiw
15
Employment by skill groups
average changes 2000-2007, 2008 and 2009, in %
Total
High-skill
Medium-skill
Low-skill
10
5
0
-5
-10
EU-27
CZ
HU
PL
SK
RO
Source: Eurostat, wiiw calculations.
09
08
00-07
09
08
00-07
09
08
00-07
09
08
00-07
09
08
00-07
09
08
00-07
-15
wiiw
16
ULC growth and contributions of main components,
average annual changes in %, 2005-2010
‘Fixers’
Average gross wages
BG
GDP
EE
100%
Employed persons
LV
LT
Exchange rate
SK
SI
ULC (rhs)
AT
20
16.2
80%
15
15.0
60%
40%
9.0
11.9
12.8
10.9
5
5.6
4.5
0%
-5.0
1.8
0.0
0
2.5
0.2
-0.2
-3.6
-40%
-60%
10.5
9.8
2.2
20%
-20%
10
-10
-8.1
-9.9
-15
-80%
-100%
-5
-15.3
-20
av. 2009 2010 av. 2009 2010 av. 2009 2010 av. 2009 2010 av. 2009 2010 av. 2009 2010 av. 2009 2010
0505050505050508
08
08
08
08
08
08
Source: wiiw Annual database incorporating national statistics and Eurostat.
wiiw
17
ULC growth and contributions of main components
average annual changes in %, 2005-2010
‘Floaters’
Average gross wages
CZ
GDP
HU
Employed persons
PL
Exchange rate
RO
RU
ULC (rhs)
UA
100%
25
80%
60%
11.5
40%
20%
-40%
17.2
5.6
9.5
0.5
4.2
0%
-20%
20.6
19.3
18.6 15
10
5
6.6
4.0
-1.1
-3.0
20
22.2
0
-4.6
-5
-6.3
-10
-15.5
-60%
-15
-15.1
-80%
-20
-100%
-25
av. 2009 2010 av. 2009 2010 av. 2009 2010 av. 2009 2010 av. 2009 2010 av. 2009 2010
05-08
05-08
05-08
05-08
05-08
05-08
Source: wiiw Annual database incorporating national statistics and Eurostat.
wiiw
21
Exchange rates
 Flexible exchange rates have supported sustainable current
account deficits
 ‘Floater’ countries had a less costly adjustment to the crisis (lower
employment losses)
 Nominal depreciations improve competitiveness and support growth
once external demand recovers
 Fixed exchange rates tend to mandate procyclical fiscal policies
during the crisis and in the medium run
 EMU membership may not protect against real exchange rate
misalignments
 Flexibility helps – especially in times of crisis
wiiw
22
Constraints following the crisis:
External factors:
 higher risk assessment of the region;
 more difficult external (and internal) financing;
 reduced growth expectations in the most important export
markets;
 tougher to join the eurozone (new OCA debate)
wiiw
23
Constraints following the crisis:
Internal factors:
 ‘Deleveraging’ of private sector, increased propensity to save;
 more limited room to manoeuvre for fiscal policy;
 weaker and more cautious banking sector;
 very differentiated processes of real exchange rate
adjustments
wiiw
24
Some tentative conclusions
 EU and national policies should be reformed in order to improve
“economic governance”
 in order to benefit from trade and financial integration regulation is
needed
 to deal with external and domestic imbalances measures to improve
competitiveness needed (Strategy Europe 2020)
 depending on the types and severity of imbalances, the speed to full
integration should be calibrated (“flexibility” helps)
 depending upon country-specific circumstances, the ‘integration
model of growth’ must be adjusted but not abandoned
wiiw
27
Selected references:
 ‘Will Exports Prevail over Austerity?’ wiiw Current Analysis and
Forecasts, No. 6, July 2010, Vienna
 ‘Whither Growth in Central and Eastern Europe? Policy lessons for an
integrated Europe’ Policy Report written by the Bruegel-wiiw Expert
Group, Vienna and Brussels, June 2010
 Atoyan, R., (2010), ‘Beyond the Crisis: Revisiting Emerging Europe’s
Growth Model’, IMF Working Paper 10/92
 Havlik, P., (2010), ‘Unit Labour Costs, Exchange Rates and Responses to
the Crisis’, wiiw Monthly Report No. 7/10, July
 Haddad, M., Harrison, A., Hausman, C., (2010), ‘Decomposing the Great
Trade Collapse: Products, Prices, and Quantities in the 2008-2009 Crisis’.
NBER Working Paper No. 16253, August
 IMF-ILO, (2010), ‘The Challenges of Growth, Employment and Social
Cohesion’. Discussion document prepared for joint IMF-ILO conference,
September
wiiw