Macroeconomic Policy and the Euro Area after the Crisis
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Transcript Macroeconomic Policy and the Euro Area after the Crisis
Macroeconomic Policy and
the Euro Area after the
Crisis
George Alogoskoufis
The Financial Crisis and
the Global Recession
Crisis unveiled serious weaknesses in the
global financial and economic system
Need for coordinated policy response
Open world trading and financial system
must be preserved
New global economic governance (G-20)
The Crisis and the Euro Area
Euro area has responded in coordinated and
relatively effective manner
Severe recession in 2009
Unemployment set to continue to rise
Inflation fell
Severe worsening of public finances
Figure 1
Growth Before and After the Crisis
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2006
-1.00%
-2.00%
-3.00%
-4.00%
-5.00%
-6.00%
2007
2008
2009
2010
2011
EA
US
UK
Figure 2
Unemployment Before and After the Crisis
12.00%
11.00%
10.00%
9.00%
EA
US
UK
8.00%
7.00%
6.00%
5.00%
4.00%
2006
2007
2008
2009
2010
2011
Figure 3
Inflation Before and After the Crisis
3.50%
3.00%
2.50%
2.00%
EA
US
UK
1.50%
1.00%
0.50%
0.00%
2006
-0.50%
2007
2008
2009
2010
2011
Figure 4
General Government Balance Before and After the Crisis
0.00%
2006
2007
2008
2009
2010
2011
-2.00%
% of GDP
-4.00%
-6.00%
-8.00%
-10.00%
-12.00%
-14.00%
EA
US
UK
Figure 5
Government Debt Before and After the Crisis
90.00%
85.00%
80.00%
75.00%
% of GDP
70.00%
EA
US
UK
65.00%
60.00%
55.00%
50.00%
45.00%
40.00%
2006
2007
2008
2009
2010
2011
The Stability and Growth Pact
Fiscal deficits below 3% of GDP at all times
Fiscal balance in the medium term
Public debt tending towards 60% of GDP or
lower
Rules for corrective action
Macroeconomic Policy for a
Sustainable Recovery
Limited role for fiscal policy to play an active role
in sustaining the recovery.
Core economies must adopt a cautious approach to
fiscal consolidation and take time so as not to
stifle the recovery
Peripheral economies must proceed with fiscal
consolidation immediately to gain credibility
The ECB must continue providing adequate
liquidity
Microeconomic and Social Policy
Important for the medium run to persist
with the Lisbon agenda
The European social model should function
within the available budgetary limits