Economic growth in Europe · Karl Aiginger Economic growth in Europe - Status, vision, research 4th...
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Karl Aiginger Economic growth in Europe - Status, vision, research 4 th LTIC International Conference, Luxembourg October 8 th , 2012 H:\user\aig\vortrag\ltic_luxembourg_2012.pptx
Transcript of Economic growth in Europe · Karl Aiginger Economic growth in Europe - Status, vision, research 4th...
Karl Aiginger
Economic growth in Europe -Status, vision, research
4th LTIC International Conference, LuxembourgOctober 8th, 2012
H:\user\aig\vortrag\ltic_luxembourg_2012.pptx
1 10.10.2012
Outline
Status of Europe Three questions Solving governance problems A vision and a research agenda Summary
2 10.10.2012
Outline
Status of Europe Three questions Solving governance problems A vision and a research agenda Summary
3 10.10.2012
Economic growth: 2012
2000/2010 2012 2008/2012p.a. Cumulated
EU 27 1.4 -0.2 -1.0
USA 1.5 2.2 3.2
Japan 0.8 1.4 -0.7
China 10.5 8.0 42.4
World 3.6 3.1 12.0
Recession in Europe 2012 Output below 2008
*
4 10.10.2012
Unemployment rate
2011 2012 2012-2008
EU 27 9.7 10.3 3.2
USA 8.9 8.2 2.4
Japan 4.6 4.5 0.5
China 4.1 4.1 -0.1
Two-digit unemployment rate 2012 higher than 2008.
*
5 10.10.2012
Growth forecasts up to 2025
1995 – 2010 2010 - 2025EU 27 1,9% 1,5% – 1,8%USA 2,5% 2% – 2,5%Japan 0,8% 1% – 1,5%China 10% 5% – 7% *World 4% 3,5%
Future growth: EU 27 between 1% and 2% Euro area less than EU 27 Growth differentials towards US.
Quellen: OECD, PWC, GS, CEPII, Carnegie.
*
6 10.10.2012
The necessity to change
Insufficient dynamics: past, 2012, future Debt, budget deficits (albeight less than in the US) Disequilibria: Missing industrial base in south Increasing income differences within countries Youth unemployment 20% (some countries 50%) *
The younger generation does not assess the current system as satisfactory
Populist movements at the right and left.
7 10.10.2012
Outline
Status of Europe Three questions Solving governance problems A vision and a research agenda Summary
8 10.10.2012
Overarching question 1: Back to the core or …
Core Europe instead of Euro area or EU27: Germany, France, Netherlands, Finland, Austria, Luxembourg*
Neighbours and potential partners: Direct neighbours: Albania, Bosnia/Herzegovina, Kosovo,
Croatia, Macedonia, Montenegro, Serbia; Armenia, Azerbaijan, Georgia, Moldova, Ukraine, Turkey; Switzerland
Wider neighbourhood: Russia, Belarus, Israel, Northern Africa
All neighbours have alternatives to EU.
9 10.10.2012
European growth 2000/2009between 1.7% and 2.6%
1.7
1.9
2.2 2.3
2.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Core Europe Euro area EU 27 EU plus direct neighbours
EU plus wider neighbourhood
USA
10 10.10.2012
The share of „Europe“ in the world (GDP, 2009, current currency)
13.5
21.5
28.2
31.3
34.9
8.6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Core Europe Euro area EU 27 EU plus direct neighbours
EU plus wider neighbourhood
China
USA
11 10.10.2012
... or including the neighbours
Stronger integration within EU-27 necessary Coordination of national policies to increase visibility,
coherence, impact * Extending Europe: becoming partners with neighbours Stepwise membership for neighbours and wider neighbourhood The Euro as an anchor, but later membership than now Facilities of eventual coordinated exit *
The larger Europe is essential for higher growthand European visibility in a globalized world.
12 10.10.2012
This is how China looks at Europe:The red one or the green one
Core EuropeEU 27
Direct neighboursWider neighbourhood
13 10.10.2012
Overarching question 2:Going for the low road ...
Moderate wage increase, irregular contracts Deregulating labour/flexible/less social costs Low taxes, low social inclusion Forget energy efficiency Ignore or adapt to climate change *
But: competitors can lower their own costs too.
14 10.10.2012
… or for a high road strategy?
Focus on innovation, education Growth is as important as budget consolidation Growth rate has to be always above interest rate Modern social inclusion (incentives, activation) Ecology and energy conservation as a growth driver Visions for 2025 for each region and country *
Rich countries can compete only by innovation and education.
15 10.10.2012
Overarching question 3: Should Europe follow the US model …
US model (productivity leader) Large deficits in trade and budgets Growing financial sector, manufacturing =>10% Large income differences, low priority of sustainability*
Asian model State promoted and assisted industrialization Low consumption/high investment Undervalued currencies, capital controls Low individualism, restricted access to internet/media.
16 10.10.2012
... or develop an own model?
Enjoying globalization; inviting neighbors Dynamic, open for new members and neighbors Social inclusiveness (including migrants) Ecological front (even if some competitors do not follow)
Stable financial sector (serving the real economy) *
The best socioeconomic system of the world Combining income growth, inclusion & sustainability Research on a new European model needed
17 10.10.2012
Outline
Status of Europe Three questions Solving governance problems A vision and a research agenda Summary
18 10.10.2012
Europe 2050: Policies and chances
Stabilization of the financial sector Interest rates for government bonds similar to US
EZB must become a lender of last resort* Globalisation is taken as a chance/opportunity Cultural diversity is an advantage (needing institutions) Regional differences in per capita income should decline *
Core Europe: 15% and declining 10% 2050 Europe plus neighbourhood: 30% of GDP
and stable share in world GDP.
19 10.10.2012
Reforms needed 1: Better governance
Current governance inadequate for Monetary Union
Three reform areas:
• Better fiscal surveillance: fiscal union, fiscal pact
• International regulation of international banksIncluding resolution system, deposit guarantee
• Strategies to limit disequilibriaIncluding responsibility of creditor countries
Limiting spread of incomes, reduction unemployment
20 10.10.2012
Reforms needed 2: Reduction of risks, uncertainty
Increasing financial stability• Regulating non banks and speculation
• Financial transaction tax (reducing high frequency trade)
Separating sovereign risk from banking risk
Increase firepower of ESM
Automatic transfers to reduce impact of shocks e.g. European unemployment insurance
Transformation of ECB into a lender of last resort(additional task: stability of financial sector)
21 10.10.2012
Reforms needed 3:Stimulate growth and employment
Prioritize EU 2020 (education, R&D) over budget consolidation
Shift all available funds to creation of new firms/youth employment
Growth component & vision for deficit countries
Shift expenditure and taxes towards growth orientation
Guarantee low interest for period of reforms in periphery
Use receipts for Financial transaction tax first for growth promotion• Then for reducing taxes on business and consumers
Shift the growth path towards more inclusiveness and sustainability
22 10.10.2012
Outline
Status of Europe Three questions Solving governance problems A vision and a research agenda Summary
23 10.10.2012
The vision: A new growth path beyond Europe 2020
Elements of the vision: Stronger dynamics due to openness and growth less differences in incomes, higher employment World leader in environmental technology Stable due to a modern, regulated financial system Open, enjoying globalization; inviting neighbours
This is a transition deeper than Europe 2020 It needs outside monitoring plus scientic support
24 10.10.2012
Welfare, Wealth, Work (WWWforEurope)
The goal
Europe needs to become more dynamic, social and ecological
Scientific support for Europe 2020
Towards a socio-ecological transition *
The project
7th Framework Programme
WIFO (Coordinator) plus 32 partners, 4 years
http://www.foreurope.eu/
The research project: WWWforEurope
25 10.10.2012
Strategies are known to work only if• they are accepted and well founded• milestones for implementation are set and known• proofs and preconditions of success are known• causes for potential failure are known
Strategies must not be adjusted by ad hoc priorities nor bepostponed due to national elections
Consistent strategy: socio-ecological transition
The necessity for scientific support
26 10.10.2012
Area 1: Challenges for the European Welfare State
Area 2: The Environmental and Biophysical Dimension
Area 3: Drivers for Change: Innovation, Industrial and Innovation Policy
Area 4: Governance Structures and Institutions at the European Level
Area 5: The Role of Regions in the Socio-ecological Transition
Area 6: Framing of the Project, Integration and Synthesis
The areas of WWWforEurope
27 10.10.2012
Outline
Status of Europe Three questions Solving governance problems A vision and a research agenda Summary
28 10.10.2012
Status, decisions, actions
Status: Low growth, high unemployment, instability Europe 2020 is sidetracked by consolidation Decisions in Europe for the future:
Enjoy globalisation and openness Go for a high road Develop and offer the European model to others
Reforms and actions: governance, risk containment, growth strategy
29 10.10.2012
Why this time is different (hopefully)
Reforms needed are known, but "too little too late" Fiscal union, regulation of banking, Democratic reforms Finance sector serves real economy
Monitor transition, find obstacles and best practice WWWforEurope project by DG Research, operated by WIFO
Change to a new growth path needed Where inclusion, sustainability, stability are
growth drivers for the new European model
30 10.10.2012
Karl Aiginger
Economic growth in Europe -Status, vision, research
4th LTIC International Conference, LuxembourgOctober 8th, 2012
H:\user\aig\vortrag\ltic_luxembourg_2012.pptx
