Transcript Structural reforms and macroeconomic policies: some

Macroeconomic Dialogue – all talk and no
action?
Presentation to NewGov conference
‘New Modes of Governance’, London School of
Economics, 30-31 March 2006
Andrew Watt
European Trade Union Institute for Research, Education and Health and Safety
http://www.etui-rehs.org
Overview of presentation
The economic case for policy coordination
The relevance of the MED for policy coordination
The limitations on the scope of the MED
Proposals to reform the MED
EU
level
National
level
Political perspectives
Interests
Shifting
of actors
consensus on macroeconomic policy
Relevance
of future economic developments
Case for policy coordination
Interdependence of actors
Uncertainty, shocks
Need for forward looking policies
Time lags
Sub-optimal equilibria
All suggest simple policy assignment will not work
Investment share and unemployment, EU15,
1961-2001
Investment share (lhs)
Unemployment rate (rhs)
‘Real’ short-term rate, Germany (rhs)
25
12
24
10
23
22
8
21
20
6
19
4
18
17
2
16
15
0
61
65
70
75
80
85
90
Source: European Economy no. 4, 2002: Tables 3, 19, 24, 49: own calculations
Note: real interest rates time series not available for EU15.
95
0
4
ECB main refinancing rates, inflation and real
growth, 1999-2002
ECB base rate
HICP
Real GDP
5
4
3
2
0
Jan-99
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan-00
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan-01
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan-02
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
1
Source:
ECB Monthly Bulletin February 2002, February 2001, Sept. 2000
5
The relevance of the MED for policy coordination
Other coordination mechanisms (SGP, BEPGs, Eurogroup,
Lisbon Strategy/EES)
Limited to one or two elements and actors of the policy
mix, or structural policy focus
MED is the only coordination organ that brings together all
policy mix actors
ECB, social partners, finance ministers (?), Commission
Implies potential to coordinate a growth and employmentoriented strategy (expanding nominal demand with wageinflation anchor)
Limitations on the scope of the MED
Weakly institutionalised
• Bi-annual meetings at technical and political level
• Very limited time
• Discussions not strategic/forward-looking, limited to
exchange of information 9useful) and positions (less so)
• Only at EU-level, little articulation with national level
• Fiscal policy not really represented
• No external impact (confidentiality)
• EU12 or EU25?
7
Limitations – actor constraints
ECB – strong decision-making power/commitment, but mandate
and independence gives it little incentive to compromise with
other actors. Under prevailing understanding must simply
deliver price stability – basta. No obligation to seek out least
costly path.
EPC – does not really represent fiscal policy. No aggregate
representation of fiscal policy (Eurogroup?) and no national
MEDs, where fiscal policy more relevant
Employers – interested in exchange of views, but very cautious
about‘positive’ forms of European integration. Unable to
commit membership in any way
Unions – intellectually committed to coordination and suffering
most through managing inflation through unemployment.
Limited ability to commit membership
8
Actor constraints – a shared view of the world?
Actors sharing a basic model of the economy seen as key precondition
Mixed picture
Some ‘historical’ convergence of views (e.g. unions accept CB
independence)
MED itself has aided mutual understanding
Ad hoc coalitions (SPs, ECB/COM, ECB/UNICE)
But clearly ideological differences remain (unions to some extent
isolated)
9
Reforms of the MED – proposals by unions
•
•
EU-level MED must be developed into an on-going governance
instrument
•
More regular meetings (poss. Focussed on monetary policy and social
partners)
•
More strategic orientation of debate
•
Incorporation of external expertise (scenarios)
•
Stronger articulation with national level
•
Need for a ‘voice’ to stabilise expectations
MEDs must be institutionalised at national level
•
To determine appropriate wage and fiscal policy stance for each country
•
To avoid beggar-thy-neighbour policies (real devaluation)
•
To underpin EU-level coordination efforts
•
Tie in national govts/fiscal policy
10
Political prospects for reforms of the MED
Interests of actors
Shifting consensus on macroeconomic policy (hegemonic
discourse)
Relevance of future economic developments

Actor interests

Currently only partially favourable

All actors would benefit from an improved equilibrium (higher
employment and wages, higher profits and reduced social
conflict, greater inflation predictability and reduced political
pressure on ECB, end of SGP-related problems)

But how to move to new equilibrium? Prisoners’ dilemma of
commitment and trust (e.g. btwn wage and monetary policy)
11
Political prospects for reforms of the MED


hegemonic discourse shifting

Maastricht assignment reflects neo-liberal high water-mark

Widespread dissatisfaction with fiscal (and to lesser extent
monetary) regime: SGP reform

Perceived success of US ‘Keynesianism’

More assertive finance ministers, stronger Eurogroup (?)

End of Issing’s reign
economic performance/crisis

Will continued underperformance promote more LM
reforms or ‘structural reform’ of macro policymaking

Catastrophalist scenario (Flassbeck)

Intra-EMU competitive tensions, seccession from EMU
12
Challenges/incentives for organised labour
Different traditions in EU countries
Past problems with and opposition to ‘incomes policies’
New challenge: unemployment not inflation
Organised labour in a position of weakness (declining membership
etc)
Gives TUs a role (again)
Arrest decline in wage share
Avoid beggar-thy-neighbour policies
-> Europe’s trade unions must invest in coordinating their
bargaining strategies
13